Workers Feel The Heat of Exploding Health Costs

Just as the Congressional reform bills start to move forward, word comes from Hewitt & Co., the big benefits consulting firm, that workers will have to pay 10 percent more for both insurance premiums and out of pocket expenses next year. Based on data from 325 large employers with more than 13 million health plan participants, the survey shows that in 2010, the average worker will pay $4,023 for health care. That includes $174 a month for insurance; the rest is for deductibles, copayments, and the like.

Employees' share of health costs has tripled since 2001, and employers' has doubled, to $9,120 per year. The companies surveyed by Hewitt are looking at a 6 percent increase in their health spending in 2010.

But even though workers' share is rising faster than employers', businesses are finding the cost growth in health care intolerable. "Maintaining the status quo is simply not an option," says Antonio Perez, chairman and CEO of Eastman Kodak Co. and chairman of the Business Roundtable's consumer health and retirement initiative. Interestingly, the Business Roundtable and other business groups have parted ways from the Republicans, who do not seem interested in helping employers deal with the healthcare crisis.

Meanwhile, the insurance companies, though generally supportive of Sen. Max Baucus' centrist reform bill, are upset that he has cut the fine on consumers who do not buy insurance from $3,800 to $1,900. What they fear is that with individual insurance costing several times that amount, many people will simply opt to pay the penalty rather than purchase insurance. This is not simply greed on the insurers' part; they have agreed to drop their pre-existing condition exclusion and support other insurance reforms only if the legislation leads to universal coverage.

To judge by the upshot of the individual mandate in Massachusetts, the insurers are worried about the wrong thing. Most Massachusetts residents who had the opportunity to buy insurance at an affordable price did so rather than pay a tax penalty that is no more than half the cost of coverage--and much less in many cases. The problem is that the cost of subsidizing insurance is outpacing the state's ability to fund the program. The federal government will face the same difficulty when it tries to implement the individual mandate provision that is found in all of the reform bills.

It is at that point that we will discover how much individuals are willing and able to pay for health care. For the average worker, $4,000 per year is a hefty price. Unless the government can figure out how to pay the difference between that and the cost of coverage for the working uninsured, we're all in a lot of trouble.