Rising health care costs and an ailing economy are forcing more Connecticut employers to turn to high deductible health plans, as they search for ways to cut costs on premiums.
The trend is accelerating a cost shift from the employer to the employee, and changing the types of insurance plans managed care companies are offering.
At Aetna, for example, three out of four quotes for Connecticut employers are for high-deductible, or consumer-directed health plans, said Martha Temple, Aetna’s president of the New England market.
In response to that demand, the Hartford-based insurer has streamlined its small business offerings in Connecticut, reducing the number of health plans for small employers , from nearly 30 to 12. Of those 12 options, about three-quarters are high deductible plans.
Temple said she expects more employers to turn to high deductible plans as health care reform kicks in because the legislation will force companies to offer richer, more expensive benefits.
“New mandates are going to put more pressure on costs,” Temple said. “We will see employers move to higher deductible plans to offset costs from increased benefits.”
A consumer-directed health plan is an insurance coverage with a high deductible that is typically combined with a health-savings account, the tax-advantaged product that is either funded by the employer or by regular contributions from employees. Enrollees use the accounts to pay for qualified health expenses before they reach the deductible.
John McGrath, a principal with Mercer Health and Benefits in Norwalk, said more employers are turning to high deductible plans because they offer a cost savings on premiums, which continue to rise.
McGrath said he oversees about 20 small-to-mid market companies, which have experienced average rate increases on their insurance plans ranging from 10 to 25 percent. As a result about 50 percent of his clients now offer some type of high deductible plan.
Jason Gutcheon, of the Professional Business Insurers in West Hartford, said three-quarters of his 350 clients also offer a high deductible or high hospital deductible plan.
In some cases, McGrath and Gutcheon said, the high deductible plans are being offered on an optional basis. But some employers facing the highest rate hikes are replacing traditional plans altogether, with the consumer-directed option.
“Premiums have escalated so dramatically that employers need to have another option to save money,” McGrath said.
The economy and looming health care reform have a lot to do with the shift in the market. In response to the downturn, 30 percent of employers say they reduced the scope of health benefits or increased cost sharing, and 23 percent report increasing the amount employees pay for coverage, according to a recent survey by the Kaiser Family Foundation and Health Research & Educational Trust.
Workers on average are paying nearly $4,000 this year toward the cost of family health coverage — an increase of 14 percent, or $482, above what they paid last year, the survey said.
Since 2000, workers’ contributions to premiums have gone up 147 percent, while overall premiums rose 114 percent.
At the same time, 27 percent of covered workers now face annual deductibles of at least $1,000, up from 22 percent in 2009, the survey found. Among small firms 46 percent face such deductibles.
And consumer-driven plans now enroll 13 percent of covered workers, up from 8 percent last year.
“With the economy struggling, businesses have been shifting more of the costs of health insurance to workers through premiums, deductibles and other cost-sharing,” Kaiser President and CEO Drew Altman said.
Insurers like Aetna are shifting their benefit packages to meet the new demand.
Farmington-based Connecticare recently unveiled a new small business health plan that allows members to access their primary physician for a $30 copayment per visit. But all other covered services are subject to a $1,000 individual/$2,000 family deductible.
Once the deductible is met, members are responsible for 50 percent coinsurance up to a maximum of $3,000 individual/$6,000 family. The plan then pays 100 percent for covered services once the out-of-pocket maximum is met.
“We are expecting more small business people, who do not currently offer insurance, may soon be enticed to look at options again due to the new federal health reform law,” said Michelle Zettergren, Connecticare’s head of sales and marketing.
Proponents of consumer-directed plans, including insurers, say the plans are one of the answers to reducing health care costs in the United States. When consumers have a high deductible, they have a financial incentive to eliminate unnecessary care and seek lower-cost, higher-quality treatments.
Insurers are leveraging those plans with online tools that allow members to compare prices for prescription drugs or get estimated costs for treatment options, Temple said.
“Getting consumers to think about how they spend health care dollars will help employers control costs,” Temple said.
But critics, who include some consumer groups, say such plans may cause patients to avoid treatments altogether, which would lead to higher costs down the road.
“If premiums and costs continue to be shifted to consumers, households will face difficult choices, like forgoing needed care, or reexamining how they can best care for their families,” said Maulik Joshi, senior vice president for research at the American Hospital Association.
As more employers turn to high deductible plans, they are self funding some of the deductible in order to mitigate the cost burden for workers and stay competitive in terms of the benefits they offer. But those contributions have shrunk due to the recession.
And some firms have eliminated their contribution altogether, which can lead to the downfall of the program, and make workers look at other employers, McGrath said.
“If you don’t couple the offering with a significant employer contribution, the plans tend to falter,” McGrath said.
