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Employer-Sponsored Coverage Not Vanishing, Experts Say

By Sara Lubbes, CQ Staff

December 6, 2007 -- Employers are not backing away from offering health insurance to workers, according to a new study by the Employee Benefit Research Institute (EBRI), a business-focused research group.

But companies do want workers to take more responsibility for their health care costs, something that will be hard for employees to swallow, experts told employers gathered at an EBRI-sponsored forum Thursday.

The EBRI study—released to coincide with the forum—found that although the number of firms offering health insurance has declined about 9 percent since 2000, about 59 percent of employers are still offering the coverage. That number is same as it was in 1996.

"We're essentially where we were back them," said study author Paul Fronstin, the director of EBRI's health research and education program. "Employer-sponsored health care is not vanishing."

Employers in the study also agreed they would only drop health care coverage if they lost government-sponsored tax breaks and said it would be "insane" for any large firm to be the first to slash insurance benefits, Fronstin said.

But employers do want to move away from traditional health insurance plans toward a new model, known as consumer-directed coverage, the experts said.

Under the relatively-new kind of insurance plan, employees use a health reimbursement account or a health savings account to buy routine health services. Employers can contribute to these accounts, much like firms contribute to retirement savings plans. Other worker expenses are covered by traditional insurance, but only after workers pay a high deductible.

Such plans are designed to put more of the burden of responsibility for costs on the employee, who, in turn, is supposed to receive more detailed information about health care costs and options for treatment and doctors.

Critics of the plans say they shift the cost-burden to employees and discourage them getting health care when they need it. A 2006 survey, conducted by the Kaiser Family Foundation, found that enrollees in such policies are twice as likely as individuals in traditional health care plans to say that they needed medical care in the past year but did not get it due to costs.

But Joe Bogdan, a representative of insurance firm CIGNA Healthcare, said Thursday that a comparison of workers enrolled in CIGNA's traditional plans versus their consumer-directed plan showed that people in the two plans spent about the same out-of-pocket amount on health care over two years.

At the same time, overall costs of health care went down: CIGNA saved 12 percent in the first year under the consumer-directed plan. In the second year, the insurer saved about 5 percent.

People enrolled in the consumer-directed plan were also more likely to visit a doctor for preventative care, not just once they got sick, Bogdan said.

But convincing workers that a consumer-directed plan is preferable to traditional health insurance will not be easy for employers, said Jodi DiCenzo, a behavior specialist with Behavioral Research Associates.

Employees are unlikely to voluntarily enroll in the new plan, but employers could opt to enroll workers automatically, much like firms do with 401(k) retirement savings accounts, DiCenzo told forum attendees, which included representatives from Bank of America, American Express and the International Brotherhood of Teamsters.

DiCenzo stressed it is important that employers do not overwhelm their employees with too many health care choices, but that just giving employees a pamphlet or hosting a class about the health care options is not going to be enough.

"People are not likely to do anything unless they get a kick in the pants," she said.

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