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Thursday, Mar 28, 2024
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Employers Look for Tools to Combat Rising Health Care Costs

San Diego employees pay a higher share of their health care benefits compared to the national average, according to a new analysis from a global human resources consultancy.

The trend stems from area employees’ preference toward health maintenance organizations, or HMOs, with organizations like Kaiser Permanente providing comprehensive care for which employees don’t mind paying a premium, said Lee Reichenbach, the report’s author with Aon Hewitt, a subsidiary of British firm Aon PLC.

In San Diego, the average projected employee contribution is $2,571 per year compared with the national average of $2,499. This contrasts to 2008, when San Diego employees paid $1,534 — or $154 less than the national average of $1,688.

“Employers in the West in general, including San Diego, are a little more aggressive about passing on cost increases to employees in the form of employee contributions, because the out-of-pocket costs are still lower than nationwide,” Reichenbach said, referring to costs such as co-pays for doctors’ visits.

While about 1 to 2 percent of this year’s increases can be attributed to elements of the Affordable Care Act, health reform’s impact on employer groups has varied dramatically, she said.

HMO Costs Catching Up

Employer costs to participate in San Diego HMOs will increase 7.5 percent in 2014, to $11,696. In 2008, the cost was $7,975. Preferred provider organizations, or PPOs, will cost about $10,887 in 2014, a year-over-year increase of 6.5 percent — and up from an average of $8,004 in 2008.

The reason HMO costs have increased so significantly is that they started from a lower base and “had a lot of catching up to do,” Reichenbach said. The HMO system, however, has very good cost efficiencies — particularly in San Diego and throughout Southern California.

Nevertheless, she said employers are taking note that with paychecks having increased very little in the past five years, the ability to shift costs to employees is diminishing.

“Employers are looking at things like seeing which networks are the most cost efficient and putting more care-management tools like wellness programs in place, so that employees aren’t over utilizing their benefits,” Reichenbach said.

The average cost per employee for health care plans among major companies in San Diego rose from $8,757 in 2012 to $9,209 in 2013. That number is expected to rise to $9,851 in 2014. The average total health care cost for San Diego employees — including employee contributions and out-of-pocket costs — is projected to be $4,437 in 2014, up from $4,042 in 2013.

Costs Rise Faster in Major Markets

Nationally and in San Diego, health care plan costs have shown comparatively modest increases, which deviate from an upward trend during the past three years. Increases in health care plan costs were 5.2 percent in 2013 compared with 6.5 percent in 2012. However, Aon Hewitt projects increases in San Diego will jump up to 7 percent in 2014, slightly higher than the national average of 6.7 percent.

Many factors contributed premiums nationwide rising slower. These include the lagged effect from the economic recession on health care spending, as well as continued adjustments as employers and insurers become less conservative than they were when facing uncertainty around economic conditions and health care reform.

In 2013, the study found that major U.S. markets across the board saw higher rate increases than the national average, with Los Angeles increasing 6.9 percent, Orange County 6.9 percent and San Francisco 4.8 percent.

The study captured health care cost and benefit data from 516 large and midsize U.S. employers — many which Reichenbach said had a presence in San Diego. Nationally, the study represented 12.8 million participants, more than 1,200 plans and $61.2 billion in 2013 health care spending.

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