Health insurance costs for large employers in Chicago rose 3 percent in 2013, the lowest increase in at least 11 years, according to data released Thursday by benefits consultant Aon Hewitt.
But their employees shouldered a much larger portion of their health care costs, a trend that's expected to continue in the years ahead as companies seek ways to rein in ever-rising expenses related to offering benefits.
Employees' share of health care expenses, which includes contributions to pay for premiums and out-of-pocket costs, including copayments and coinsurance, jumped 9 percent in 2013 to $5,135, up from $4,715 last year.
In 2014, employee costs are expected to rise another 9 percent to $5,613.
"I think what's happening is that employers say they can only afford so much of an increase per year, and that's what they build into their budgets," said Tim Nimmer, the chief health care actuary at Aon Hewitt. "We're finding that employees continue to bear a larger portion of the total cost; they're the ones picking up the difference."
Seeking to protect their bottom lines, companies have been shifting more of the burden to workers over the last decade, a period of spiraling costs in the nation's health care system. For workers, that means higher premiums, deductibles or other cost-sharing in the form of copayments or coinsurance.
Workers' share of the overall health care premium now stands at 22 percent, up from 18.6 percent 10 years ago, according to Aon Hewitt research.
Within the past year alone, nearly half of employers have raised deductibles and other out-of-pocket responsibilities for employees. Another 43 percent are considering doing so in the next three to five years.
"The trend the last few years has been for employers to raise deductibles, and I think that trend will continue," said Sarah Millar, a Chicago-based health care attorney at Drinker Biddle & Reath. "Many employers are finding that their plans provide richer benefits than the minimum required under (the Affordable Care Act), and as a result, they are beginning to offer less rich benefits."
While new fees and taxes levied on employers and insurance companies starting next year as part of the new federal law are among the drivers for projected health care increases, the law also has a provision that caps the amount workers pay each year for coverage as a percentage of their income.
Starting in January, employers that offer insurance face fines if they don't contribute enough to make their least-expensive plan "affordable" to workers, meaning health insurance premiums cannot cost more than 9.5 percent of an employee's annual income.
As a result, many large employers have tinkered with plan designs and employee contributions to ensure most of them fall below that line, Nimmer said.
But that does little to stem the rising costs of overall coverage.
The cost of providing coverage per employee this year in Chicago was $10,753, up from $10,434 in 2012 and $9,871 in 2011, Lincolnshire-based Aon Hewitt found in its latest analysis, which compares cost and benefit data for 516 large U.S. employers that account for $61.2 billion in annual health care spending.
Although cost growth for Chicago-area employers has slowed over the last two years, Aon Hewitt expects the reprieve to be short-lived. Costs are expected to rise 6.6 percent in 2014, to $11,466 per employee, mirroring a national trend.
The new taxes and fees associated with the law account for a portion of the increase, but the major driver is the consumption of health care services, Nimmer said.
In the aftermath of the economic recession, people put off going to the doctor or having certain procedures because of uncertainty about job stability and personal finances. Now, "we're seeing early indications that use is creeping back up, and that's going to lead to higher costs," Nimmer said.
With further increases expected in the future, businesses are exploring new methods of managing their risk and holding down expenses.
Some companies, like United Parcel Service Inc., have dropped coverage for spouses who are eligible for coverage elsewhere. Others are reducing employer subsidies for dependents.
Local firms like Walgreen Co., Sears Holdings Corp. and Addison Group LLC are moving workers to private exchanges run by Aon, Mercer and other benefits consultants.
The approach offers employees more options and control over their health insurance, but it also is intended to save companies money by reducing their exposure to rising costs.
For 2014, Aon Hewitt's exchange will include more than 18 large employers and an estimated 600,000 people. Mercer said earlier this week it has signed up 52 employers to use its exchange, which it expects to cover about 200,000 employees, retirees and family members next year.
Another shift is that employers are requiring workers to take more responsibility for their health. Instead of offering employees incentives for participating in wellness programs or health screenings, they're starting to penalize them if they don't.
Some companies, particularly smaller to midsize employers, are seeking to delay by a year some of the law's new taxes and requirements by changing renewal dates on their company policies so they begin in December, a month before the law broadly goes into effect, said Allen Wishner, chief executive of Flexible Benefits Service Corp. in Rosemont, an insurance brokerage.
"We're seeing a lot of smaller employers opting for (Dec. 1) renewals simply to avoid some of the taxes," said Wishner, who is also a director of the Employers Council on Flexible Compensation.
His assessment of the employer health insurance marketplace this year: "It's been chaos."
pfrost@tribune.com
Twitter @peterfrost
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