Employee Benefits-Medical Plans and Health Care - Research Paper Example

Employee Benefits-Medical Plans and Health Care The total cost of health care and health care plans in the United States have been on the rise from $75 billion in 1970, $2.6 trillion in 2010 with an expected rise of 4.8 trillion in 2021. This means that the cost of health is expected account for nearly 20% of the American economy. The increasing rise in the cost of health care has led to many employees and consumers struggle to afford access of health care through subscription to health insurance premiums. Furthermore, not all the employers have the capability of offering health care coverage for all their employees. As such, more than 50 million employees are approximated to lack health care coverage. For those with health care insurance, there is an increase in the health care costs of their share annually. This makes many Americans to have major challenges in paying for their premiums and consequently, their medical bills in case of an illness. Most people are reported to even forego delay their medical care. Increasing costs of health care are also a strain on the state and federal governments’ budget. With the escalating rise in the cost of health care, budgetary provisions have also increased considerably thereby hindering the ability of the country to provide provisions for important projects which could otherwise address major issues or enhance development. There are several factors that are associated with the increase in the cost of health care. The rising cost of health care in the United States can be traced to the underlying spending on doctors, specialists, dentists and physicians. According to Health at a Glance1 (2011), hospitals in the United States spend about two and a half times more money of the payment of the salaries of the health care specialists more than other Organization of Economic Cooperation and Development (OECD) nations. This increases the cost of operating hospitals as the specialists are too expensive thereby translating the cost to patients. The rising trend of health care cost can be attributed to the increase in prices of care especially due to consolidation of the hospital industry. Hospitals have been spending much on ensuring effective provision of health care services. Recently, the prices of all major categories of health care such as surgical procedures and hospital stays. Consolidation of hospitals through mergers and acquisitions has also contributed largely to increase in the cost of health care. For instance, prices of hospital health care services rose by 33% between 2009 and 20102 when there were major cases of mergers and acquisitions. The cost of provider services in the United States in very high than other countries such as Europe. This is due to increased spending on clinical and physical services. One of the leading reason is the high prevalent rate of obesity in the United States which require adequate medical spending. The medical field has also been characterized by regular advancement in medical technology which has significantly influenced an upward shift in the cost of care services. Of the overall 65 % increase in prices of health care spending, 30% of can be tracked spending on the implementation of medical technologies. The new technology is required in hospitals as it expands the options available for the treatment of different medical needs. However, the approach involves replacing lower-cost medical procedures and options with those that are higher cost. Healthcare benefits cost-sharing has become very strained as a result of increased costs of health care provision. Employers still contribute the majority of the cost of obtaining health care for their employee’s despite the changing trends in the costs. However, businesses are forced to find an alternative way of coping with the increasing demand so as to sustain their operations. Cost sharing has been on the rise from 2000 and continued to a great increase in the past decade. In the last ten years, the annual premiums have risen to a whopping 65%. In 2004, the annual cost share in terms of premium of a family plan was $7,289 which has increased to $12,011in 2014. While at the beginning of the rise the employers absorbed all the increase, there reached a time when they felt it was too much and therefore, the extra cost they could not handle was pushed to employees. As such, employers have been trying out ways in which they can make employees absorb more the cost of the premium. Employees are required by their employers to share more by increasing their share in the healthcare insurance kitty in order to reduce the burden of the rising cost of health care benefits on the part of the employers. This trend has been reported to cause an accelerated tendency of employees having a negative perception about work thereby reducing moral and consequently, job satisfaction. Outpatient costs have been reported to increase at a significantly higher rate than the inpatient rate.3 This is mostly attributed to drugs that have to be bought for treatment of outpatient. In this case, the cost sharing required to be paid for a prescription depends on the type of the drug and also whether the plan’s formulary considers the drug to be a preferred drug on not. This is because health care plans differentiate cost sharing for levels of the drugs based on the drug type. The first-tier drugs is $10, the second-tier drugs is $29, the third-tier drugs in $52 while the fourth-tier drugs is 80. However, only 60% of the total workers are subscribed to a cost-sharing plan with at least three tiers. Only 12% are covered by a plan that pays for all the cost of a prescription with only 18% of the covered workers have a plan that provides that all the prescription drugs have the same cost sharing. Employers are experimenting with different ways of ensuring that workers share in on the rising cost of medical care. This has prompted an increase in copayments, deductible, low contribution towards family coverage and penalties for workers who fail to join wellness programs. The Affordable Care Act has influenced the new trends in cost sharing. More workers are required by the law to enroll to health care plans, failure to which they are prone to payment of penalties. As a result, wellness programs have increased in popularity as employers are obliged by law to offer incentives for workers’ participation in wellness programs or impose penalties for failure to join wellness programs. This is likely to push the cost of coverage from 20% to 30%. While many employees and workers blame the Affordable Care Act for raising the cost of medical care, experts hold that the act has had a catalytic effect on the already rising costs and therefore, it did not initiate it, but it did accelerate it. Analysts say that having to pay more on copayments and deductibles and other cost-sharing effects by employees make them more conscious about their health be not delaying or postponing trips to the doctor. Health laws require that employers provide healthcare coverage for their workers. However, the rising cost of offering health care coverage to workers is very undesirable to employers who are required to dig deeper into their pockets to cope with the hiking medical rates. However, employees feel that health care benefits are an effective way of ensuring recruitment and retention of the most competent workers especially for large companies. However, small companies are anticipated to drop coverage for their employees to reduce the burden. As such, workers and employees are prompted to seek for coverage through "private exchanges". Which are neither subsidized by the government nor provided for in the health law. In this plan, workers are given a flat dollar amount on the basis of their coverage and they are also allowed to choose from the different plans depending on the amount of premiums they are able to contribute towards their coverage. It is therefore imperative to note that the rising cost of health care cost has been one the rise for the past decade and are expected to continue increasing in the next decade. Employers are therefore seeking new ways for cost sharing due to the increased burden on employee coverage. Since of the ways that employers are utilizing is increasing the copayment and deductible while others are dropping employee coverage. As such, "private exchanges" have been on the rising tends to address the gap. References Kaiser Family Foundation, “Employer Health Benefits: 2012 Annual Survey.” September 2012. U.S. Census Bureau, “Income, Poverty and Health Insurance Coverage in the United States: 2011.” December 15, 2014. http://www.census.gov/prod/2012pubs/p60-243.pdf  Commonwealth Fund, “State Trends in Premiums and deductibles, 2003-2010: The Need for Action to Address Rising Costs.” December 15, 2014.  www.commonwealthfund.org/Publications/Issue-Briefs/2011/Nov/State-Trends-in-Premiums.aspx Health at a Glance 2011: OECD Indicators – Why is Health Spending in the United States So High? December 15, 2014. www.oecd.org/health/healthpoliciesanddata/49084355.pdf Health Care Cost Institute, “2011 Health Care Cost and Utilization Report.” December 15, 2014. Commonwealth Fund, “Explaining High Health Care Spending in the United States: An International Comparison of Supply, Utilization, Prices, and Quality, December 15, 2014. http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2012/May/1595_Squires_explaining_high_hlt_care_spending_intl_brief.pdf Read More