Employer PPO Deductibles Doubled in 2008

Health care costs are increasing. Sadly, in an ever-tightening economy, most people are not surprised when the cost of health care rises, whether it is seen in prescription drug costs, copayments, or general monthly rates. But when it happens to employer-based programs and the figure doubles in the course of a year, it is a bit startling.

It turns out that the median deductible paid by employers for PPO health plans rose from $500 in 2007 to $1000 in 2008, while only eight years ago, it was common for employers to pay no deductible or only $250 in some cases. The steep incline in only one year is causing many employees to reconsider buying into those health care plans and to possibly withdraw from the health care system altogether. With the number of uninsured Americans already at approximately 47 million, any potential increase in that number should cause great concern all around.

The new deductible figures came from the National Survey of Employer-Sponsored Health Plan, a survey conducted annually by Mercer. The health plans monitored included 2,900 employers, both private and public with ten or more employees each. Not only did they find that the average deductible passed on to employees was $1000 in 2008, but employers’ own health care costs only increased 6 percent.

It was PPO (Preferred Provider Organization) plans that noted the biggest increases, and approximately 69 percent of all employees are enrolled in such a plan. And these are traditional PPO’s offered by employers, not the newer and lesser known Health Savings Account (HSA). Very few employers are offering the HAS’s, and those that make it available tend to be larger companies with more than 500 employees, whose deductibles average between $300 and $800, due to more discounts for purchasing larger plans from insurance companies. .

A viable alternative, though only really feasible for said large companies, is a CDHP (Customer Driven Health Plan), which is becoming more popular. Though the minimum deductible will be $1,150 in 2009, a CDHP allows the savings in the HSA part of the plan to fund most of that deductible, thereby giving more value to employees who choose the plan. According to the study, 20 percent of employers with 500 or more employees took up CDHP plans for their employees in 2008, which was a 6 percent increase from the previous year. However, most small and medium-sized employers have not yet found the CDHP to be a cost-effective plan for the employees or the companies themselves.

Employers are predicting only a 6.4 percent increase for each employee in 2009, but in order to accomplish that goal in the face of tough economic times, there may need to be changes in the benefits or plans offered, as well as the insurance providers used. In addition, retirees, especially those choosing early retirement, are seeing medical coverage reduced or removed altogether. Only 27 percent of employers are offering early-retiree medical coverage currently, and that number has been dropping rapidly over the past few years, which effectively discourages early retirement and puts extra pressure on employment numbers on the whole, as fewer jobs open up for new generations of workers.

What some employers are doing to combat costs is offer educational programs to encourage more health-conscious behavior. With a healthier work force that experiences less health problems overall, the cost of coverage can be lowered into a workable range and prevent significant deductible increases. However, it is typically larger companies that are able to afford the implementation of such plans.

Smaller employers, especially those with between 10 and 499 employees, face the most hardships in the coming year. With an ever-steepening financial crisis, companies are struggling with revenue and other issues, often causing health care to take the brunt of the financial hit.

As President-elect Barack Obama prepares to take office in January with a new administration, many employees and others who struggle with the costs of health care—or who have no medical coverage whatsoever—place great hope in the promises Obama made throughout his campaign. A move toward universal health coverage, or significant reforms to the current system, is looking more like a reasonable approach to reducing health care costs in America and offering coverage to more people.