Open Enrollment Calls for Higher Costs

• ByJoe Mont,
• On 8:38 am EDT, Friday October 9, 2009

BOSTON (TheStreet) -- As American workers enter so-called open-enrollment season, they can expect to take another hit on top of dwindling 401(k) retirement plans: higher costs.

A survey by Watson Wyatt found that more than four in 10 employers said they will raise deductibles, copayments and out-of-pocket maximums "due to the economic crisis." Deductibles for individual and family coverage are expected to increase by $50 to $100 or more among many companies.

The bad news follows a trend of rising health-care costs. In 2009, premiums for employer-sponsored health insurance rose to $13,375 for family coverage, with workers on average paying $3,515 and employers paying $9,860, according to statistics compiled by the Kaiser Family Foundation, a nonprofit focused on health-care issues. Since 1999, premiums have skyrocketed 131%, while wages have risen 38% and inflation has increased 28%.

The firm found that employers are adding high-deductible plans, often with a health-savings account. Many said they also plan to reduce the number of health-plan options. As more employers consolidate and change their health plans and networks for 2010, some employees may have to change physicians or pay higher out-of-network costs.

Similar findings come from Aon Consulting, a unit of consulting firm of Aon Corp..

Aon surveyed 1,313 employers and found that 41% expect to make more substantial changes to their 2010 medical programs than they did this year. Specifically, 70% are planning to increase employee contributions and 67% will raise deductibles, co-pays, coinsurance or out-of-pocket maximums. More than half will introduce or expand a wellness program next year, and 34% are planning to introduce or increase financial incentives for wellness programs in 2010.

Deciding what changes to make for the coming year was a challenge for many employers.

"Some of our clients feel that it has been a challenging year for their employees," says Tom Lerche, U.S. health-care practice leader for Aon Consulting. "They have had layoffs, pension freezes, salary reductions and in response a number of them are saying they are going to be pretty much keeping the health-care offerings as they are. There might be modest increases in co-pays and employee contributions, but they don't want to throw more changes at the workforce. There are also some employers who say, 'I want to wait and see what happens with national health reform, so I don't want to make substantial changes.' "

The "employers who are making more aggressive changes" see that current costs are unsustainable and changes are needed, he adds.

To reduce employer and employee health-care costs, companies have been implementing audits as a short-term savings solution. According to the Aon survey, 46% of organizations conducted a dependent eligibility verification audit in 2009 or earlier, and 20% are planning to do so in 2010 or later. Those audits can save companies as much as 10% a year in benefit costs.

"We've been on the honor system for 20 to 30 years," Lerche adds.

As companies are bombarded with information from such providers as UnitedHealth Group, Aetna and WellPoint, Lerche has a few suggestions for them.

"Many employers offer elective benefit options that are employee paid, but offer a way to branch out and fulfill needs in the family," he says. "It could be a critical illness policy, it could be additional life insurance. The elected benefit options are a great bonus, and many employers have made them a part of their annual enrollment process. Employees should keep an eye out for new wellness programs being launched."

-- Reported by Joe Mont in Boston.

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