Health Care Dilemmas for Employers

Several items about employer-provided group health care benefits have crossed my desk lately. In light of the presidential election next week, all of these items could be addressed soon under a new administration. But it is important to understand the scope of the problem that group health insurance has become for employers.

The rising cost of health care benefits is the issue that will have the biggest impact on the workplace in the years ahead, according to a recent survey of human resource professionals by the Society for Human Resource Management. The HR professionals surveyed believe that health care costs not only have the biggest impact on the bottom line but will affect our global competitiveness.

The national concern over rising health care premiums is echoed in Texas for good reason, according to an October 23 article in the Dallas Morning News:

Texans earn more than they did eight years ago, but their health insurance premiums have jumped six times faster than their wages and gone up faster than the national average, according to a study to be released today.

In its study, “Premiums versus Paychecks,” Families USA, a Washington, D.C., nonprofit consumer advocate, found that health care premiums rose 86.8 percent from 2000 to 2007 – from $6,638 to $12,403 – while median earnings rose just 15 percent – going from $23,032 to $26,484.

“[Texas] earnings were actually a little better than the rest of the nation [14.5 percent], but health care premiums increased faster,” said Ron Pollack, executive director of Families USA.

In my part of the country, those rising health care costs are causing many employers to drop group health care coverage completely as a benefit. Only high paying white-collar jobs, government jobs and the largest employers in the area still consistently provide group health care benefits, and many of them are requiring their employees to share in the cost of the premiums.

Apparently that trend is not just local. The Economic Policy Institute in Washington, D.C. says that only 62.9 percent of the population under 65 receives employer-sponsored health insurance, down from 68.3 percent in 2000. I remember a time when I first started practicing law in 1987 when it was just a given that your employer would provide health insurance as a standard benefit.

That percentage of employers providing health care coverage may decrease even more because of some new federal legislation. Stuck into the $700 billion financial bailout bill passed last month was the Mental Health Parity & Addiction Act of 2008. Under this new law, if a group health care plan covers treatment of mental illness or addiction, the treatment limits (restrictions on frequency of visits, number of visits, days in treatment, etc.) and financial requirements for mental health services can no longer exceed the restrictions on medical and surgical benefits. In other words, if your group health plan provides 30 days of physical rehab after knee surgery, it must pay for at least 30 days of rehab for addiction treatment at the same coinsurance rates, deductibles, etc.

Self-insured plans have to meet these same requirements. There is an exemption for small employers (under 50 employees). This mental health parity bill will be effective for 2010 calendar year plan. The bottom line of this bill is that health care costs will increase because of it, in addition to the substantial yearly increases in premiums that businesses have come to expect.

Medical insurance is a mess for any employer to deal with and try to afford. Hopefully all the executive and legislative branch candidates who take office in January will recognize that the employer-provided health care system has to find some relief or it will break.

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