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CCH® HR MANAGEMENT - 06/25/09

Three out of four public employers consider increasing employee deductibles, co-pays or premiums

Public employers nationwide are modifying their employee health care benefits to include more cost-saving measures, according to a recent survey conducted by the International Foundation of Employee Benefit Plans. The financial crisis and escalating health care costs are motivating public plan sponsors to change both their plan design and plan funding. The survey found that 72 percent of public employers are increasing or considering an increase in their employees' deductibles, coinsurance or co-pays. In addition, 74 percent of public employers are increasing or considering an increase in employee premiums.

When asked why they were considering higher deductibles, 46 percent of public employers cite the financial crisis. Almost the same percent, 45 percent, cite the crisis as the reason why they are thinking about higher employee premiums. "These findings are surprising, although cost-sharing measures have been common in the corporate world for quite some time, public employers have traditionally not modified their health care plans in this direction," said Sally Natchek, senior director of Research at the Foundation. "The fact that the majority of public employers are now increasing deductibles, co-pays and premiums illustrates the dual effect rising health care costs and the financial crisis are having on their plans."

Other cost-saving programs that public employers are instituting include adding a consumer-driven health plan (31 percent), shifting to a self-funded plan (26 percent) and introducing spousal surcharges (20 percent).

"Many public employers were previously skeptical of consumer-driven health plans, but now the cost-saving aspect of the plans may appeal to them," said Natchek. "The survey showed that while still the minority, a significant number of public employers are implementing these types of plans."

Nearly three-fourths of public plan sponsors, 72 percent, are placing more emphasis on controlling prescription drug costs. The majority of public employers are expanding participant education about drug options and costs (74 percent), increasing co-payments and/or coinsurance for drugs (61 percent) and mandating the use of generic drugs (54 percent). Nearly a quarter emphasized that they are taking these measures specifically because of the financial crisis.

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