The Future of Employee-Sponsored Health Benefits
Traversing Tough Terrain: The Future of Employee-Sponsored Health Benefits
Since 1990, employers have been a major driving force in changing health insurance and financing mechanisms for working Americans and their families. Employers transformed the most common form of health insurance from indemnity to managed care, and from retrospective to prospective coverage and payment policies. As a result, only 7% of workers are covered by indemnity insurance today, versus 27% in 1996, with the balance in managed care (71%) and point-of-service (22%) plans. With this fundamental metamorphosis in American health insurance, employers were able to rein in health inflation—for a time.
Today, rapidly rising health insurance premiums threaten the employer-sponsored health system upon which two-thirds of Americans rely. In 2001, a survey of employers found premium growth to have reached 11%. This is not new territory. In 1988, premiums were rising at a rate of 12%. In the late 1980s, however, tightly managed care stood at the ready, and over the ensuing decade it combined with strong economic growth and low overall inflation to rein in the increase of premiums in particular and health care costs in general. At the beginning of the 21st century, however, much-publicized provider ire, consumer complaints, government regulation, and litigation have weakened the effectiveness of tightly managed care. As a result, employers must find alternative routes to controlling costs. Smaller employers are under the greatest threat, but large employers are feeling the pressure as well. The stakeholders with the most to lose, of course, are the employees pushed to shoulder more of the costs for health care or forced to lose health benefits altogether.