Benefits survey: what are Indiana employers offering?

• Author: McKimmie, Kathy
• Position: Employee Benefits

BLISTERING HEALTH-CARE cost increases have forever transformed the once paternalistic employer-provided benefit into an ever-increasing cost-share arrangement with the employee. Managed-care and disease-management programs attempted to control the upward spiral; now the focus is on consumer-driven health-care strategies, where employees are asked to take more responsibility for decision making, typically within a high-deductible policy, while assuming more of the cost.

Preliminary results from Mercer Human Resources Consulting's 2004 annual survey of employer-sponsored health plans show that if employers simply renewed their current medical plans, making no changes, the average cost increase for 2005 would be nearly 13 percent, about four times general inflation.

But there will be changes. Employers expect to tweak benefit design, negotiate with vendors or switch medical plans--and shift more costs to employees--to bring the actual increase to 9.6 percent. Add another 0.5 percent for Indiana employers, says Matthew Arnold, Mercer's health and group consultant for Indiana, explaining that Indiana's costs are consistently higher, more along the lines of New York and Chicago than most Midwest areas. Even though that's below last year's survey numbers of 10.1 percent nationally and 10.8 percent in Indiana, no one's cheering.

Companies taking part in the 2004 Compdata survey of Indiana employers showed higher increases than Mercer's survey, but still a small decline over the prior year. Overall, Indiana employers' health-care costs went up 16.3 percent in 2004, compared to 17.6 percent in 2003 and 18.1 Companies with Health-Care Premium Increase Since March 2003 percent in 2002. Amy Karnmski, a manager for Compdata Surveys, says 14 percent of Indiana employers reduced benefits (such as dental or vision) in 2004, up from 11 percent in 2003 and 9.7 percent in 2002. Further, 51 percent of employers passed on more costs to the employee in 2004, up from 49.7 percent in 2003 and 40.3 percent in 2002.

HMOs helped keep cost increases low in the mid-'90s, says Arnold, because of controlled reimbursement to providers. But a backlash from physicians and other providers resulted in cost increases since then. The flat, easy-to-administer co-pays used by HMOs led to another problem, he said; members weren't educated about the true cost of services, and overutilized them. Drugs, for instance, were $10 a pop, no matter the true cost. "Going back to HMOs is not...