Get ready to pay even more for health care

Employers raise deductibles, co-payments, premiums

Employers' cost for medical coverage will rise 6.4 percent next year. The increase would be higher but companies continue to shift more of the total expense to employees.

This year, employers saw health-benefit costs climb 6.3 percent after increasing deductibles, co-payments and workers' portion of premiums, according to an annual survey by Mercer, a firm that advises companies on medical insurance.

For example, the median deductible for PPO health plans jumped to $1,000 this year, up from $500 in 2007, according to the national survey of 2,900 employers. That means workers paid more out of pocket before insurance coverage kicked in. PPOs are the most popular type of health plan, covering 69 percent of employees.

"More and more, people are going to pay when they access health-care services," said Steve Graybill, a principal with Mercer in Charlotte. "We have unprecedented times in our economy, and employers are trying to manage these cost increases."

Increases of 6 percent a year, while tame compared to the double-digit hikes seen earlier this decade, remain well above the overall inflation rate, driven higher by an aging population, rising costs for services and drugs, and other factors. Soaring prices for medical coverage come amid higher costs for food and other household bills.

Projected costs for 2009 could start to climb more quickly if a recession drags on and forces employers to make more severe changes, Graybill said. When workers get laid off, or are worried about losing their jobs, they tend to use more services -- in case employer-sponsored benefits disappear. That can drive prices higher throughout the health industry.

The Mercer survey was conducted in late summer, before the economy's slump intensified. "We could see things get worse," Graybill said.

Blue Cross and Blue Shield of North Carolina, the state's largest health insurer, is seeing data that match the Mercer survey, said spokeswoman Heidi Deja. That includes more employers shifting to plans with $1,000 deductibles.

"It's forcing employees to become better health-care consumers," said John McDonnell, a principal with Progress Benefit Solutions in Raleigh.

The trends are spurring companies to offer more wellness plans that encourage healthy behavior, including stop-smoking and exercise programs. At some point, those programs will become mandatory, where workers who don't participate will pay more for coverage, McDonnell said.

The Mercer survey follows others that predict employers and employees will continue to see costs rise for medical coverage. A recent Kaiser Family Foundation survey also predicted that workers will see higher deductibles, co-pays and other fees next year.

Among other findings from the Mercer report:

* Among 92 North Carolina-based employers in the survey, 31 percent plan to raise deductibles, co-payments or out-of-pocket maximums next year. About 40 percent will increase employees' share of premiums.

* Nationally, 27 percent of employers still offer early-retiree medical coverage, down from 46 percent 15 years ago.

* Of employers with 500 or more workers, 26 percent give workers incentives to participate in health management programs.