(Tom Croke)
After suffering through a few years of steep health-premium increases, Pawtucket-based American Insulated Wire recently switched to an out-of-state HMO in hopes of keeping costs in check.
The company, which employs 1,000 workers nationwide, decided it could save money by having all its employee health plans under one roof, according to Harvey Goulet, the company’s vice president of administration.
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While it’s too early to tell if the move will save on health insurance costs, Goulet said the company is trying to avoid passing along premium increases to employees. The company’s health benefits already are better than most and require workers to pay only a minimal contribution, he said.
“We’re really working hard to maintain the same plan,” Goulet said.
Employees at many other Rhode Island firms haven’t been as fortunate.
Consistently sharp annual increases in health-insurance premiums have prompted what some call a fundamental shift in employers’ approach to providing health benefits.
“In the past, employers providing health insurance to employees meant just that: Health insurance came with employment,” said Max Powell III, former president and chief executive officer of United Healthcare of New England who now works as a health-insurance consultant.
“Today, there is a general trend away from providing coverage and toward creating opportunities for employees to purchase health insurance on a tax-deferred basis,” Powell said.
For example, some companies have lowered their percentage contributions to employee health plans, requiring workers to shoulder more of the costs. And many employees must wait 90 days or six months before they’re eligible for health benefits, Powell said.
Another recent trend has been the emergence of “cafeteria plans,” where employees can choose from a menu of health benefits. While these plans give employees a choice of coverage options, they also allow companies to set aside a fixed pool of money to cover health benefits.
“Everyone’s gotten whacked with higher health premiums,” said John Gregory, president of the Northern Rhode Island Chamber of Commerce. “I think employers are trying to get to the point where health insurance is somewhat of a fixed cost, so they can manage these increases better.”
But Jim Moniz, a benefits consultant for several large employers in Rhode Island, said he sees only a “potential” trend toward companies thinning their health-benefit packages. While he says he has seen more mid- and large-size companies go to cafeteria plans, Moniz said companies haven’t been able to substantially cut back on benefits because workers have been so hard to find in recent years.
“There’s definitely a desire on the part of employers to reduce the rate of these increases,” Moniz said. “But because of the tight labor market, companies feel like if they pull that trigger and thin their benefit designs, employees will go to a competitor.”
But Powell maintains that many companies finally are starting to ask employees to pay a larger percentage of the costs – forcing some employees to decide whether or not they can afford their company’s plan.
“The share the employee has to pay has become so large that in some cases it’s just not affordable, and employees are forced to find other options,” Powell said.
Often that other option means no health coverage at all. Powell estimates, based on state and federal data, that more than two-thirds of Rhode Island’s uninsured people are employed — up from about half 10 years ago.
That statistic reflects the growing number of people turning to publicly funded programs. RIte Care, for example, was expanded in 1998 to offer coverage to parents of RIte Care children whose income is less than 185 percent of the poverty line.
Another example of the growing reliance on public funding is in Vermont. At a regional health-care conference at Harvard University last month, Vermont Gov. Howard Dean said one-third of the state’s population relies on at least some Medicare or Medicaid funding.
Powell’s theory is that the country is slowly drifting toward a publicly funded, national health-insurance program. As health insurers increasingly compete for lower-risk patients, they’re squeezing employers with older, sicker employee pools.
The result: Older and sicker people are forced to rely on public programs. This, Powell says, has led to calls for lowering the Medicare eligibility age to 55, because so many older people can’t afford coverage in the private market.
“At some point we’ll be publicly insuring everyone over 55 and everyone with chronic conditions,” Powell said. “Eventually, the people that advocate for a national health-insurance program will say that the only people not publicly insured are the low-risk people, so let’s bring them into the pool too because it will save money.”
Some of these factors were at play in the early ’90s, when President Clinton proposed a universal health-care system. U.S. Sen. Jack Reed (D-RI), said small businesses had been a catalyst of that failed plan because they were unable to keep up with rising health-insurance costs.
“Small business owners had seen their premiums rise dramatically,” Reed said at last month’s conference. “They drove Clinton’s plan, and that could happen again.”
