The High Price of NJ Employer Healthcare
Although New Jersey employers pay some of the highest health insurance premiums in the country, a survey released this week says companies expect rates to climb by about 8.5 percent in 2011 -- up from the 6.7 percent increase in a typical year. Healthcare reform is expected to add one to two percent to overall costs.
After factoring in healthcare reform plus demand and high-cost services, premiums could rise by as much as 13 percent, according to the Mercer 2010 National Survey of Employer-Sponsored Health Plans. But New Jersey companies are preparing for this, the survey reports, by raising deductions and boosting co-pays in order to keep their costs down.
Still, New Jersey companies can only do so much to keep a lid on healthcare premiums. Mercer found that the Garden State's average cost per employee was $10,751, making it one of the highest in the country, compared with the national average of $9,562.
Those costs can be partly attributed to the fact that many Garden State workers are covered by so-called Cadillac plans, courtesy of high-tech industries like pharmaceuticals and telecom.
What's more, New Jersey employees can avail themselves of Cadillac medical services. Some of the best -- and priciest -- medical care in the country, Mercer notes, is located in New York City and Philadelphia.
Doing the Math
Last year in New Jersey health-benefit costs rose 6.7 percent, only a whisker more than they did in 2009, according to the annual survey. That 6.7 gain slightly lagged behind the average national increase in 2010, which was 6.9 percent, up from 5.5 percent in 2009.
That acceleration in national healthcare increases follows nearly a decade of stable or slowing growth, according to Mercer, a global consulting company. The consulting firm attributed the increase not to healthcare reform, since most of it begins to take effect next year, but to pent-up demand for health services.
The year 2010 is "Year Zero for Healthcare Reform -- the year against which the effects of the new Patient Protection and Affordable Care Act (PPACA) will be measured," according to Mercer.
New Jersey employers are predicting much larger increases in healthcare costs in 2011, and more than a third of them plan to shift those increases to their employees, Mercer found.
Asked about their 2011 costs, New Jersey employers estimated that if they made no changes to their current plans, other than as required under healthcare reform, their costs would climb by 12.7 percent.
But they expect to hold increases to 8.5 percent by making changes to their health insurance plan's design, the insurer, or both, according to Mercer.
The survey found that 38 percent of the New Jersey employers plan to shift health-insurance costs to their employees next year by raising deductibles, co-payments, coinsurance or out-of-pocket maximums. In addition, 52 percent will increase their employees' share of the premium contribution, and 18 percent will increase employee cost-sharing some other way.
As noted, Mercer found that the Garden State's average healthcare cost per employee was one of the highest in the country.
One reason the Garden State's health-benefit costs are high is the type of businesses located in the state.
"You have a number of industries that have traditionally had fairly generous benefits, such as the pharmaceutical industry, telecom, which have generally had fairly rich benefits," stated Rich Fuerstenberg, a partner in Mercer's Princeton office.
"Compare that to others [states], he continued, where they have a heavy concentration of retail, and lower-pay industries that are not as generous."
Fuerstenberg also said, "Some of the things that are unique that New Jersey employers face is the fact we're in a high-cost area, and there are a number of high-cost providers
"I always describe New Jersey north as a suburb of New York and south as a suburb of Philadelphia," he said. "They [employees] want to go to the best providers, with best generally defined as in the city. There are not a lot of geographic barriers to stop someone who needs treatment from going to Fox Chase [Cancer Center] in Philadelphia or Memorial Sloan Kettering in New York."
Classifying Health Plans
Correspondingly, New Jersey companies are generous in the types of plans they offer. For example, 71 percent of all employees are enrolled in Preferred Provider Organizations/Point-of-Service (PPO/POS) plans, 19 percent in Health Maintenance Organizations (HMOs), 9 percent in consumer-directed health plans (CDHPs) and 1 percent in traditional indemnity plans.
The average New Jersey employee contribution for employee-only coverage is $110 monthly for a PPO/POS, $119 monthly for an HMO and $75 monthly for a CDHP, according to the survey.
Nationally, the median PPO in-network deductible is $1,000 for all employers, but just $500 for large employers. The median deductible for all employers in New Jersey is $350.
Fuerstenberg again said that New Jersey's roster of generous employers accounts for that low $350 figure.
According to the survey, 26 percent of New Jersey employers offered a CDHP, with an account feature (a Health Saving Account or Health Reimbursement Arrangement) in 2010. The same percentage said they are very likely to offer one in 2011.
That 26 percent for New Jersey is about half the national average, which is 51 percent.
Fuerstenberg attributed New Jersey's relatively low percent of CDHPs to the fact that the state has employers who often offer high-end, health plans.
A CDHP is a medical-benefit plan in which employees use spending accounts, an HSA or HRA, to purchase health care services directly. Non-routine expenses are covered by traditional insurance after members meet a generally high deductible.
For its survey, Mercer questioned 2,836 public and private employers across the country to gather its 2010 data. Mercer also broke out statistics for New Jersey based the responses of 65 Garden State employers.