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How Employers Are Pushing Workers Into State Health-Insurance Exchanges

Employers are loading a higher percentage of insurance premiums than ever on the backs of their workers while reducing benefits, according to the 2010 Health Benefits Survey of the Kaiser Family Foundation and the Health Research and Educational Trust. The only relief in sight is that, starting in 2014, some workers will be able to purchase lower-priced insurance on the state insurance exchanges with the help of vouchers from their companies. The question is whether large employers are pushing their workers in this direction by shifting more costs to them.

This year, employees' share of the cost for family coverage jumped 14 percent to nearly $4,000 a year. By contrast, the overall cost of employer-based insurance increased only 3 percent, one of the lowest increases in memory. The two growth rates were so different because employers simply refused to contribute any more than they did in 2009.

Since 2005, workers' contributions to premiums have gone up 47 percent, while overall premiums rose 27 percent, wages increased 18 percent, and inflation rose 12 percent.

Meanwhile, 27 percent of covered workers must now meet a deductible of at least $1,000, compared to 22 percent in 2009. In firms of fewer than 200 employees, 46 percent of workers now have deductibles of that size.

The average cost of family coverage for a family has now hit $13,770, and the cost of a PPO plan -- the most popular choice -- is over $14,000. Not surprisingly, the only kind of coverage that has grown significantly in 2010 is "consumer-driven plans," which marry high deductibles to health savings accounts and cost less than PPOs. Thirteen percent of American workers now belong to consumer-driven plans, up from 4 percent in 2006 and 8 percent last year.

The percentage of firms offering health benefits, surprisingly, increased from 60 percent to 69 percent this year. Most of the companies offering benefits for the first time are very small, so the rise had little impact on the portion of workers offered insurance. It's also believed that the unexpected growth in the percentage of employers that provide coverage might reflect the high mortality rate among small companies in the recession.

What does the future hold? If companies continue to raise their workers' cost of insurance and reduce their benefits, employees may find they can get better, cheaper coverage in the insurance exchanges when they start up in 2014. If a worker's income is less than 400 percent of the federal poverty level, or $88,000 per year, and cost of insurance accounts for more than 8 percent of income, she'll be eligible to join the exchanges even if she works for large companies. Their employers will have to give them a voucher to buy insurance in the exchanges equal to the amount those employers would otherwise spend on coverage. But if companies refuse to spend any more on insurance than they do now, by 2014 those vouchers will be a bargain.

How many employees will join the exchanges as individual insurance buyers is unclear. But 8 percent of $44,000 a year -- twice the poverty level -- is about $3,500 a year. Considering that the average worker is already paying $4,000 a year for family coverage, that will make a lot of people eligible for the state exchanges in 2014 besides the individuals and small firms they're designed for. And if insurance purchased through the exchanges is actually cheaper -- something that has yet to be proved -- many people will run to them. At some point, the combination of individuals without access to work-based coverage, small-firm employees, and corporate workers fleeing high insurance costs might represent the majority of privately insured people.

If that happens, all bets are off, because large employers might just slip out the back door as they give their workers vouchers to buy insurance. Then they'll accomplish what they've been after, all along: to stop the growth of their insurance costs.

Image supplied courtesy of Flickr.
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