Insurance News

Employees pass up health insurance benefits as costs rise

Posted on: November 15, 2011

The rising cost of health insurance is pushing more South Florida employees to consider what had been unthinkable: Passing up medical coverage offered at work.

A strata of young, physically fit workers have always skipped employer health benefits they view as an unnecessary cost. But insurance agents say a growing number of older employees and even families are trying to save money by switching to low-priced health policies they buy on their own.

Insurance experts say employees can find credible, lower-cost coverage outside the workplace, through high-deductible plans. But they say it’s a gamble because it takes a lot of work to find a good plan without big holes. Individual policies typically do not cover as much and often charge higher co-payments and deductibles. They also can raise your rates at will and drop you if you get sick.

“Dropping coverage at work? Generally a bad idea,” said Carlos Castresana, South Florida unit leader at Wells Fargo Insurance Services, which designs health benefits for employers. “Even if you’re healthy, you don’t know if you’ll get sick.”

Yet more employees are thinking about it as they reach their open-enrollment period to sign up for 2012 coverage at work.

Employees are expected to pay 5.9 percent more for health coverage next year, as employers pass along costs to workers, consultant Towers Watson reported. A family policy from work cost an average $344 a month this year, according to an annual employer survey by the Kaiser Family Foundation.

The increases arise partly because this year, companies paid 8 percent to 9 percent more this year for employee health benefits, the Kaiser survey found.

About 19 percent of U.S. employees passed up work coverage this year, up from 15 percent a decade ago, Kaiser said. But the figure is 27 percent this year at small firms with 22 to 49 employees and at retail businesses.

Boca Raton insurance agent Don Staton said he has heard from a half dozen employees in recent weeks asking to buy low-price individual plans because the monthly premiums of coverage at work had grown too costly.

Jupiter agent Beverly J. Kingsley, who sells group and individual policies, said she has sold family policies to several executives who bypassed health benefits at their companies. One got coverage for $800 a month, half of the workplace premium.

“Everyone is trying to see if there’s a cheaper way to do it,” said Kingsley, who is president of the Palm Coast Association of Health Underwriters.

But Castresana, Staton and Kingsley almost always try to talk employees out of ditching workplace health benefits, especially if the person has a health condition or a family. Here’s why:

Coverage. Unlike group policies, most single policies do not cover maternity care and may drop you if you get pregnant. Most offer little or no mental health treatment, physical therapy or substance abuse care. Hospital coverage is often limited, exposing the patient to a risk of a big bill.

Co-pays and deductibles. Your share of the bills for doctors, hospitals and prescription drugs is usually higher in an individual plan.

No guaranteed coverage. Group plans can’t turn down an employee, but individual plans can deny or drop you based on your health. They can also deny coverage for pre-existing conditions.

Rates. They can raise rates for entire age groups during a coverage year.

“I understand the premiums [at work] are a tough pill to swallow, but look at the benefits you get,” Staton said.

The employees who may do better by skipping workplace coverage are young, healthy people who need little or no health care and are willing to take a chance they won’t get sick, agents said.

“Younger people tend to subsidize the older employees in a group health plan, so they can probably get it for less on their own,” Castresana said. But even a simple broken arm can wipe out the savings of skipping workplace health benefits, agents said.

Staton said families can get good prices on high-deductible plans that make employees shoulder the first $2,500 to $7,500 of medical bills before coverage starts. These may cost $200 to $1,500 a month for a family, depending on the details.

To pay those deductibles, workers can set up a health savings account using pre-tax money, which cuts their income tax bill. In that scenario, the employee may not have to dip any deeper into his pocket to pay for health care, Staton said.

The crucial step is finding a high-deductible plan with solid coverage of major expenses such as hospitalization, Staton said. Even so, employees are vulnerable to plans dropping them.

Employers don’t want their workers — young or old — to pass up health benefits, because if the group gets too small, the insurer may drop the company or jack up the premiums, agents said. So companies are trying to keep workers happy by offering lower cost alternatives.

AutoNation, for example, is offering a new high-deductible plan, company benefits manager Vanessa Mainster said. JM Family has a plan that costs employees as little as $3 to $4 a month.

“If everyone leaves your plan, it will impact premiums,” Mainster said.

By Bob LaMendola, Sun Sentinel.  Staff writer Marcia Pounds contributed to this report.

Copyright © 2011, South Florida Sun-Sentinel

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