As Health Care Costs Rise, Employers Consider Increasing Employee Cost-Sharing

Rising health costs and a slowing economy are leading employers to consider passing more health insurance costs on to employees, USA Today reports. According to benefit management firms, the following are some of the changes being discussed:

• A switch from copayments for prescription drugs to coinsurance, in which employees would pay a percentage of a drug's price instead of a flat fee, thus encouraging the purchase of cheaper, generic drugs.
• "Two-tier health plans" in which employees could pay more for "unlimited access to new treatments and drugs," or less for a limited selection of benefits.
• Varying copayments depending on what type of physician or medical group a patient used. For example, those who went to a community health center would pay less than those who saw a doctor from a "top-flight medical group."
• Plans where patients would pay a varying coinsurance for drugs depending on their degree of medical value -- for example, 50% for "lifestyle improvement drugs," 30% for one-time or limited conditions, and 20% for chronic illnesses.

Insurance Caps More Relevant
A second USA Today article reports that lifetime caps on payments by health insurers may affect more Americans in the near future as the rising cost of treatments combined with their effectiveness in prolonging life leaves many individuals with health care bills amounting to millions of dollars. While currently 80% of employer-sponsored health plans have lifetime caps -- typically around $1 million -- only 2,500 people a year reach that limit, according to a PriceWaterhouse estimate. However, the caps in this price range were set by insurers "several decades ago" and could become inadequate as the cost of treatment rises. For instance, a $1 million cap established in 1970 is the equivalent of $12.5 million in inflation-adjusted dollars, USA Today reports. In recent years, many employers have taken steps to increase their caps. For example, FedEx last year doubled its limit to $2 million. Rep. Anna Eshoo (D-Calif.) said she plans to introduce a bill that would mandate lifetime caps of $5 million by next year and $10 million by 2004. However, employers and insurers are generally opposed to price floors on lifetime caps for fear of "open-ended exposure to financial risk" (Appleby, USA Today, 4/5).