Medical costs are continuing to mount at a pace well above inflation, but the practice of cost shifting, or shifting bigger portions of health-care premiums from employers to employees, may be leveling off, health-plan providers here say.


As health-care premiums continue to rise, employers now are more likely to make cost-cutting changes to plans than to shift more of the premium cost to workers, says Ted Blotsky, vice president of health benefits and services at Spokane-based Associated Industries of the Inland Northwest.


Theres only so much cost shifting an employer can do other than remove health-care benefits entirely, Blotsky says.


Employers typically still are paying the bulk of employee health-care premiums, a national health-care cost survey, conducted by Towers Perrin, of Stamford, Conn., indicates. Employers, however, are paying 39 percent more for health care than they spent five years ago, while workers are paying 61 percent more, the survey shows.


The problem with simply continuing to shift costs to employees is that the healthiest employees would be more likely to opt out of health-care plans, says Mark Newbold, of Spokane-based Moloney+ONeill Benefits. That would only steepen premium increases for those who remain, while potentially precluding health-care coverage for employees and their dependents who need it most, he says.


The Towers Perrin survey shows that covered employees nationwide currently contribute 20 percent of the cost of employee-only coverage, a percentage that has changed little in the last few years.


In terms of dollars, the employees average share is $926 annually for employee coverage and $3,144 annually for family coverage, the survey shows.


The average employee-share premium increase this year will be 8 percent, compared with last year, Towers Perrin estimates.


Coverage of workers dependents, however, is an area in which cost shifting of premiums continues to be prevalent, says Steve Blaschke, of Spokane-based Fidelity & Associates Inc., a provider of commercial insurance and employee-benefit plans.


Employers are paying smaller amounts and asking employees to contribute more in regard to dependent coverage, he says, adding thats especially true for smaller companies.


Other areas where there could be some indirect cost shifting are through changes in benefits, such as increasing deductibles and copayments, Blaschke says.


Preliminary results in a national health-care cost survey being conducted by Mercer, a New York-based consulting firm, show that the median family deductible for the type of plan offered by most employers rose to $1,500 in 2007, up from $1,000 in 2003.


The Mercer survey indicates that 59 percent of employers nationwide will raise deductibles, copayments, coinsurance, or employee out-of pocket spending limits in 2009.


The only way employers are able to deal with premium increases is to look at programs and make changes, Blaschke says.


Blaschke says employee involvement in health-care choices is a key to controlling costs.


Employers need to continue to explore ways to help employees get their arms around medical expenses, he says.


For instance, Newbold says hes seeing increased interest in what are called consumer-driven plans, such as health reimbursement accounts (HRAs) and health savings accounts (HSAs). Employers own HRAs and contribute to them. Both employees and employers can contribute to HSAs, and employees own the accounts.


Such plans help stabilize premiums and increase employees responsibilities in paying for health care.


Plans with HSAs and HRAs have higher deductibles and lower premiums, and the savings from those lower premiums accumulate in special savings accounts for individual employees, who tap the accounts to meet health-care expenses, Newbold says. Any unspent portions in those accounts roll over from year to year, and the employee has control over the funds, he adds.


After several years of cost shifting, raising deductibles, and increasing out-of-pocket expenses for its employees, Spokane-based Avista Corp. has implemented a new health-care plan that encourages employee participation in several ways, says Mary Prince, the companys benefits manager.


The plan, which currently covers 650 employees and their dependents, has a high-deductible option coupled with an HRA account. Overall, Avista provides health insurance to 1,700 employees and their dependents and 650 retirees.


Prince says Avistas HRA option rewards those who help offset rising health-care costs, because the company makes any unused HRA funds available for covered employees to use toward premium costs after they retire. Not all HRS sponsors do that.


Avista also provides disease-management, health-coaching, and wellness programs.


It increases awareness and education, Prince says. People realize they are responsible for their health and ultimately the cost to the company.


She says it will take two years to analyze fully any cost savings from the program.


Meantime, Avista isnt expecting a reduction in premium costs, but rather slower growth in premium increases.


We fully anticipate an increase in premiums, Prince says. This will help take some of the slope out of the curve.


Newbold says high-deductible, consumer-driven plans with HRAs and HSAs still provide coverage for major medical expenses, while giving more decision-making responsibility to employees about when to access their accounts to cover other medical expenses.


Such plans are proving to be satisfactory for most employees, but high utilizers are not seeing much savings, he says.


Typically, 20 percent of employees and their covered dependents make 80 percent of health-insurance claims, and some people who fall in that 20 percent wont realize savings in consumer-driven plans, he says.


With further premium increases of 15 percent or more anticipated for conventional plans in 2000, Newbold foresees more movement toward consumer-driven plans.


Were seeing 20 percent to 30 percent of our groups moving in that direction, Newbold says. It only makes sense.


Blotsky says 5 percent to 10 percent of the employers in Associated Industries network are offering such plans, and he expects to see growth of 2 percent a year.


About 220 companies, each with an average of 20 employees and their dependents, participate in Associated Industries health-care network.


Blotsky says he hasnt seen much direct cost shifting or decreases in benefits in the last two years. The ratio of employer-employee contributions hasnt changed much in that time either, he says.


The higher deductible in consumer-directed health plans isnt intended as a decrease in benefits, but rather a change in how employees choose to use their benefits, he says.


The employee is more actively involved in those plans, Blotsky says.


Contact Mike McLean at (509) 344-1266 or via e-mail at [email protected].