Cost A Chronic Disease For Health Plans

George Idzikowski, one of 17,000 General Electric employees on picket lines last week, wants the increases in health insurance co-payments to stop.

"If we did nothing now, then they'll just try to increase health care costs again" when the next contract talks start again in the spring, he said. The 36-year old father of three works at GE's plant in Schenectady, N.Y.

GE may well try anyway. Costs are set to mark another year of double-digit increases, and many employers continue to shift more of the burden to employees.

Labor strife is likely to continue, too. Workers at Hershey Foods Corp. went on strike for six weeks, largely over the issue of health care costs. This year will see an unusually large number of union contract expirations and rising premiums and co-pays are going to a central point of negotiations, said Rick Bank, director of the Center for Collective Bargaining at the AFL-CIO.

Some of the bigger talks involve about 300,000 autoworkers; 40,000 tire industry workers and 85,000 telecommunications workers.

"Employers are becoming increasingly aggressive in their attempts to pass on costs to employees," said Bank. "The labor market is much looser than it has been in years and I think employers will take advantage of that to be very tough on the issue of health care."

According to Hewitt Associates, health care costs will leap 15.4 percent this year, after jumping 13.7 in 2002. Employees will be asked to shell out about 19 percent of the premium costs, up from 17 percent last year.

Last year, a Hewitt study of 528 employees found that health care ranked as the most important benefit, outscoring salary by a margin of two-to-one. Fifty-five percent of employees ranked it as their most important benefit.

At GE, company officials say health care costs have risen 45 percent since 1999 and totaled $1.4 billion in 2002. While profits rose 7 percent last year, health care costs rose 14 percent. GE said the recent changes will cost employees an average of $200 a year.

Under the new arrangement at GE, the co-payment rose from $15 to $25 for a visit to a specialist; from $12 to $16 for a drug prescription; from $30 to $50 for an emergency room visit, and from nothing at all to $150 for a hospital stay.

Last year, Idzikowski's 23-month old daughter had an abscess in her neck that twice required two surgery and involved several visits to specialists. It cost him about $350 — and would be significantly more under the new arrangement.

"When you have kids you have health care costs," Idzikowski "I'd rather have good health care than a raise."

"We don't like raising costs but our costs are going up," said GE spokesman Gary Sheffer. "We think we provide excellent benefits at a reasonable cost."

Segal Co. consultant Ed Kaplan said employers don't like to raise health care costs because it hurts morale, which in turn affects productivity.

But many see little choice. Myriad factors are driving up costs including: new expensive technologies and medications, pricier hospital and outpatient procedures, and consumer backlash against the most restrictive policies of managed care.

The problem is a lack of proven strategies to bring down costs.

Hewitt consultant Ken Sperling sees his clients trying to improve health plans' designs to better address employee needs. For example, he said, one client conducted an extensive audit to determine the specific sources of cost increases and noticed a big rise in musculo-skeletal problems such as carpal tunnel syndrome among employees. The company negotiated better deals with orthopedic specialists and contracted experts to improve ergonomics at work stations.

Companies are also trying to push more of the costs onto those who choose to use more expensive products. Many companies are experimenting with tiered plans where employees pay more for having care at more expensive hospitals.

So-called consumer-driven health plans are also becoming more popular, although they are not yet widespread. The plans provide employees with a set amount in a fund to pay for health needs. A single person might receive anywhere from $500 to $1,000 a year, a family double that. They are designed to encourage people to make better choices about their health care.

Once the fund is exhausted, a deductible — typically ranging from $500 to $2,500 for a single person and twice that for a family — is applied to any additional medical expenses. After the employee pays the deductible, a more traditional health insurance system kicks in where most of the expense, but not all, is paid by the employer.

Sterling says about 10 percent of his clients offer such a plan, up from about 2 percent last year. But he says there is no proof yet they effectively reduce costs.

By Theresa Agovino