Hospitals Feel Pain as Employers Drop Health Plans

The cost of health insurance continues to rise at more than double the rate of inflation, outpacing increases in wages and material costs, according to a National Survey of Employer-Sponsored Health Plans conducted by Mercer.

The cost increases are eroding business profits and causing small employers to drop their health insurance plans in the absence of a government mandate to provide coverage. This is happening despite the introduction earlier this year of consumer directed health plans (CDHP), Mercer notes.

The upshot is that hospitals will be seeing more uninsured patients, and more bad debts, experts say.

Michael Klozotsky, health care analyst for Kaulkin Media’s Analyst Group said the trend of fewer employer sponsored plans will lead the uninsured to delay treatment as long as possible. When they finally do seek treatment it will be in emergency rooms and for more serious ailments, which will cost hospitals more.

“If you manage your budget and resources for patients on a relatively predictable schedule, you can budget your expenses,” Klozotsky said. “If more people begin to come to an emergency room for treatment, all the budget predictability goes out the window.”

According to the survey released November 19, 61 percent of employers with 200 or fewer workers offered health care coverage in 2007, compared to 63 percent last year. Five years ago, 66 percent of those employers offered health care coverage.

The drop continues, despite the availability of new low-cost consumer-directed health plans (CDHP), which advocates once promised would provide an option for small employers contemplating terminating health coverage, said Blaine Bos, Mercer worldwide partner. Bos said 22 percent of small employers that provide coverage do not subsidize family coverage at all, leaving the employee to pay the full cost of coverage for all family members.

“While the average cost of an health savings account-based CDHP is about 20 percent lower than the average medical plan, that doesn’t make it affordable to all employers,” Bos said in a press release. “Solving the problem of the uninsured will mean addressing the question of affordability.”

Mercer provides human resources and financial consulting surveys to businesses worldwide. It is an arm of MMC, formerly known as Marsh & McLennan Companies. Mercer’s health care survey included private and public employers with 10 or more employees. Nearly 3,000 employers participated in 2007 and results represent more than 90 million full- and part-time employees, according to Mercer.