By now you’re probably accustomed to your health care costs climbing each year. But brace yourself: 2010 is shaping up to be a doozie — a year that could shake up your opinion about how attractive the current employer-provided health care system really is..
When I reported a story for the November issue of MONEY about selecting 2010 health benefits, I was shocked by the expected rise in health care costs. And while I thought the forecasted increase was alarming, I didn’t have enough space in the print edition to fully explore its roots and magnitude. So here’s what I couldn’t include the first time around:
Next year, according to human resources consultant Hewitt Associates, employees on average will see a whopping 10% jump in their premium, bringing their share of annual premium costs to $2,085. They’ll also see additional out- of-pocket costs — deductibles, co-pays and co-insurance, for example — climb 10%. Adding up all these expenditures, Hewitt says total health care costs next year will be $4,023 — triple where they were a decade ago.
Appropriately enough, this price shock comes as Congress is debating the largest health care overhaul our country has attempted in decades. About 60% of Americans under the age of 65 get health insurance through their employers. Many workers are opposed to health care reform because they like their current coverage, and do not want it to change. Yet the new stark reality is that the coverage you are enjoying right now is probably going away. There’s a good chance it will not be an option by next year, or at least shortly thereafter.
To understand why, just take a look at the trends for this year’s open enrollment season:
- Big deductibles. More employers are adding what are called high deductible plans, which typically come with monthly premiums 20% to 30% lower than those of traditional plans. But your coverage does not generally kick in until you’ve spent a big chunk of your own money: In 2010, at least $1,200 for singles and $2,400 for families. The bulk of large employers offer this type of plan as one of a few options, but some smaller companies are making it your only choice, says Hewitt’s Sara Taylor.
- Co-insurance instead of co-pays. The days of simply handing over your $20 flat fee at the doctor office seem to be dwindling. Instead, to make you more conscious of your costs, companies are moving to co-insurance, where you pay a percentage of your bill — say, 20% to 30%. “At this point co-insurance plans are more in the norm than co-pay plans,” says Tom Billet, a benefits consultant at Watson Wyatt. “I would say co-payment plans are on the way out.” This is true even for regular doctor visits and prescriptions, particularly name brands.
- In-network deductibles. For many workers, your insurance coverage kicks in immediately as long as you stay within your health plan’s network of providers. So visits to your regular doctor usually cost nothing more than your co-pay. But that is changing. Next year, some employees will now face an in-network deductible of $250 to $500 or more, before their insurance starts to pay. So that first doctor visit of the year will likely be paid for out of your own pocket. There is one exception: Preventive care, such as your annual physical, is usually fully covered even if you haven’t yet hit your deductible.
- Questions about your health. Despite the recession, companies are not pulling back on their investment in wellness initiatives. In fact, more companies are asking employees to fill out health risk questionnaires and are providing programs to improve and manage your health. A growing number are even doling out incentives for participating — for example, $150 cash for filling out a health risk assessment or enrolling in a weight loss class. Yet a few companies are beginning to make those incentives contingent upon your reaching a certain goal, such as a body mass index below 30, says Ron Fontanetta of HR consultancy Towers Perrin. Check out this story about how state workers in South Carolina who smoke now must pay more for their health insurance than non-smokers.