Workers pay more for health care - survey

More U.S. employers are adopting 'higher deductible' consumer-directed plans in an effort to control rising health care costs.

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By Parija B. Kavilanz, CNNMoney.com senior writer

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NEW YORK (CNNMoney.com) -- As health care costs continue to rise, more companies are adopting consumer- directed health plans that would lower their own costs but potentially raise costs for employees.

More than 51% of U.S. employers now offer a consumer-directed health plan (CDHP), up from 47% last year, according to the latest survey of 489 large U.S. employers from Watson Wyatt, a consulting firm that specializes in employee benefits.

And another 8% of employers are expected to adopt a CDHP by 2010, the report said.

"Employers aren't offering these plans because employees want them, but because [companies] are clearly trying to lower their own benefits costs," said Kathleen Stoll, director of health policy with consumer advocacy group Families USA.

Consumer-directed health plans (CDHPs) are typically lower premium but higher deductible health plans. They feature a kind of savings or spending account that helps employees pay their out-of-pocket expenses for covered services, or services that are not covered by a traditional plan.

Proponents of CDHPs say these plans promote more cost-conscious health care choices.

Also, these plans give consumers and employers tax-free savings vehicles through either a health savings account (HSA) or a health reimbursement arrangement (HRA).

But critics say CDHPs shift more of the financial responsibility for the costs of medical care to employees.

Although premiums for consumer-directed plans are generally lower than for other types of plans, the deductibles are high - the average general annual deductible for single coverage is $2,010 for HSA-qualified plans and $1,552 for HRAs, according to non-profit group Kaiser Family Foundation.

"No one prefers a higher deductible plan," said Stoll. "Many American workers are already on edge and they can't pay more. They just don't have the extra income in the family budget."

A separate Kaiser Family Foundation survey on CDHPs found that participants were twice as likely as others with more traditional employer-sponsored insurance to ignore medical care they needed because of the cost, choosing either to delay or skip treatment altogether.

Regarding the tax savings benefit of CDHPs, Stoll said this aspect of the plans works more effectively for wealthier American workers, "those in very high tax brackets" who can afford to pay the high deductibles and save on the small premiums.

"Over the last few years employers [have been] shifting more of the cost coverage to employees," said Paul Fronstin, senior research associate with Employee Benefit Research Institute (EBRI), a non-profit policy research group.

Not only are deductibles and co-payments increasing, "last year we found that $1,000 deductible was now common for an average small group of 200 or fewer employees," he said.

Still, the "devil's in the details," said Fronstin. "Some companies will use these plans purely to shift costs to employees."

At the same time, Fronstin said there is a legitimate argument to be made that CDHPs can "help change the way people use the health care system."

For Fronstein, the biggest challenge employers face is the lack of understanding about CDHPs. "They've only been around since 2004."

"Just because more large employers are offering them doesn't mean people are using these plans," he said, adding that enrollments are still low for HSAs because people find them confusing to understand.

Stoll of Families USA had a different viewpoint.

"I don't think employers want to withdraw [health] coverage to save on costs, but they are dealing with higher deductibles and co-payments, particularly in the current economic environment, she said.

"More costs are shifting to employees who can't afford them. This trend should be a lesson for health care reform," she added. To top of page

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