April 2004 | Health Costs Continue To Plague Employers

Expense inflation tapering off, but 3rd straight double-digit hike seen 
Friday, April 16, 2004 
BY BETH FITZGERALD 
Star-Ledger Staff 

It cost the typical New Jersey employer 13 percent more last year to provide health insurance to employees, and another double-digit increase is on the way for 2004. 

The annual survey by the New Jersey Business and Industry Association found health-plan inflation for 2003 came in slightly below 2002's 15 percent increase, and employers anticipate more easing -- to an 11 percent increase -- during 2004.

 
But at a time when the economy's overall annual inflation rate is running at less than 3 percent, employers have watched their health- insurance expenses soar 53 percent compared with four years ago, to an average $6,692 per employee, according to the NJBIA. That figure doesn't include the portion of the premium paid by employees -- and 72 percent of the 1,500 employers surveyed said they shifted a higher share of the cost to their workers last year. 

"We know that some of these costs can't be controlled; there have been some great advances in medical treatment that we want as a society, and they are very expensive," said Philip Kirschner, president of the NJBIA. 

But he said New Jersey regulates health-insurance polices sold to employers in the small-group market -- those with less than 50 employees -- and mandates a comprehensive list of medical conditions that must be covered. 

NJBIA has long lobbied the state legislature to makes some of these coverages optional, and the legislature has approved the creation of a commission to study the effect of mandates and recommend changes. 

"We need to see what (medical procedures) should be mandated, and what employers should pay for separately, if they want them," Kirschner said. 

Employers can hold down premium increases by opting for policy variations that require employees to pay more for the medical services they actually use, said Eileen Shrem, a independent insurance agent in Bradley Beach. 

By increasing the co-pay for doctor visits and prescriptions, and raising the deductible -- the portion of a bill a consumer pays before insurance kicks in -- some employers can even lower their premiums, Shrem said. 

One approach gaining popularity is the consumer-driven health plan, where employees get a personal medical account that can be carried forward to future years if it isn't used, said Michael Considine, director of sales for the consumer and commercial market for Horizon Blue Cross and Blue Shield of New Jersey. 

"This gets the consumer more involved in decision-making, and it has an impact on the use of health- care services," Considine said. 

The NJBIA survey revealed a slight moderation in health-insurance inflation that is consistent with the national picture, said Joel Canter, director of the Center for State Health Policy at Rutgers. 

"Employers are increasing the employee cost sharing, which will hold down premiums, but they are only shifting the costs back to the workers," Cantor said. "The workers still feel the pinch, and as the economy improves and labor markets tighten up, it will be harder for employers to do that sort of cost shifting." 
 

Cantor added, "most other industrial nationals control health- care costs through government regulation, but that is not even part of the political debate." 
 

Beth Fitzgerald can be reached at efitzgerald@starledger.com or (973) 392-4111.