US employers feel the pinch

With their profits under pressure many US companies offering
health insurance benefits are feeling the pinch as group health
insurance costs continue to soar.

For some companies, abandoning health insurance benefits
altogether is becoming a real option.

This gloomy picture emerged from a survey of employee benefits
consultants conducted by the Council of Insurance Agents &
Brokers (CAB) in November 2008.

Of benefits consultants responding to the CAB’s survey, 82
percent said group health insurance prices increased for small
companies – those with 50 or fewer employees – with over half of
the increases falling in the 11 percent to 20 percent range.

For medium companies – those with 51 to 500 employees – 90
percent of respondents said these companies experienced increases,
with 68 percent reporting increases in the 6 percent to 15 percent
range.

Three-quarters of the large companies – those with 501 or more
employees – experienced increases, with 40 percent reporting
increases in the 6 percent to 15 percent range.

“Most employers want to provide medical benefits to employees,
but many will be forced to shift more costs to them in order to
continue to do that,” commented the CAD’s president, Ken
Crerar.

From a cost-shifting perspective the survey revealed a growing
interest among employers in high deductible health plans (HDHP)
under which the insured pays a higher portion of costs incurred for
medical services. HDHP plans are coupled with a health
reimbursement account (HRA) or health savings account (HSA).

An HRA enables an employer to reimburse medical expenses paid by
employees, thus qualifying for tax concessions offered by the
Internal Revenue Service. An HSA offers tax advantages to health
plan members.

Of respondents to the CAD’s survey, 82 percent reported that
they sold an HDHP-HSA plan in 2008 or their clients are looking at
them for 2009.

Dropping medical coverage altogether was seen as the last resort
by companies. However, 91 percent of respondents said 1 percent to
10 percent of their clients were doing just that.