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NJ Businesses Sustain Widespread Health Coverage, Despite Rising Costs

Workers paying for larger share of medical expenses, through higher contributions and deductibles, reduced benefits

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The vast majority of New Jersey businesses continue to provide health insurance for their workforce, but as the cost of care continues to rise by double digits, employees are paying a growing price for the privilege of medical coverage.

While companies now pay roughly $3 out of every $4 for insurance, their burden is shrinking as workers are faced with higher contributions and deductibles, reduced benefits, or fewer hours and wage restrictions.

Overall, nearly 80 percent of smaller businesses have taken these or other actions to control healthcare expenses as insurance costs jumped more than 10 percent since 2014, according to the findings of a survey released Monday by the New Jersey Business & Industry Association. Business leaders said that the cost of health benefits remains their top concern in 2016, as it has been for a quarter century, according to the NJBIA.

Healthcare experts generally agree that the federal Affordable Care Act, which took full effect in 2014, helped vastly expand healthcare coverage; in New Jersey, more than 700,000 people obtained free or low-cost insurance through the law. But healthcare costs have continued to escalate, driving up the price of benefits for business and government and costing patients more because of higher co-pays, cost sharing, and deductibles.

According to the NJBIA’s findings — the results of an online poll of more than 850 businesses conducted over the summer — Garden State businesses now pay an average of $7,000 for individual health coverage, $14,000 to insure two spouses, and some $17,600 for a family plan. The situation is particularly burdensome for small businesses — those with fewer than two-dozen employees — since they don’t have as many options for absorbing additional expenses; healthcare costs jumped more than 12 percent or this group.

Despite the expenses involved, the association’s survey found that 85 percent of these companies overall, and three-quarters of small businesses, offered health benefits. Most said the goal was to attract and keep a high-quality workforce. (A growing number are offering voluntary benefits, like optional dental and vision care, that don’t cost them but are attractive to employees.) Some businesses bore the healthcare cost increases themselves; one third reduced profits and 15 percent deferred investments to pay for employee healthcare plans.

“Employers in the New Jersey small-employer market tend to be professional businesses or family businesses with a long tradition of providing benefits,” said Linda Schwimmer, president and CEO of the New Jersey Health Care Quality Institute, which has helped build consensus around models that will reduce cost and benefit patients. “As the economy improves, offering benefits is one surefire way to attract and retain top employees.”

“But the 10 (percent to) 12 percent premium increases are unsustainable for any size business,s and the cost shifting to employees eventually cancels out the value of having insurance as employees can't afford to buy it or use it,” Schwimmer added. One result is a growing interest in narrow or tiered networks, she said, in which patients trade some choice in providers for greater savings.

This cost shift has become a concern for a number of healthcare advocates, including the NJ For Health Care coalition, a campaign that seeks to build on the ACA’s success and further expand access to care by reducing the cost to consumers. The coalition made it a priority to lower consumer expenses at a conference in September and offered several solutions, including additional state oversight of plan design and the creation of a “public option” or government-run insurance plan to compete with commercial products.

In fact, Assemblyman Reed Gusciora (D-Mercer) introduced a bill (A-4211) on Monday that would implement a public option, dubbed “JERSEYCare,” that he said would build on the state’s successful Medicaid expansion under the ACA, which added hundreds of thousands of residents to the public insurance rolls. Gusciora, who had promised to sponsor such a measure earlier this year, said the program would be open to all residents, with premium rates designed to make it as affordable as possible.

“The government has the benefit of representing a large population of people, and that gives them a lot of clout in cost and reimbursement negotiations. Even better, we’re people-motivated, not profit-motivated,” he said, noting that instead of rewarding executives, a public plan can cut costs for its customers. “That’s really the need and the goal, here — to cut costs. We can’t possibly afford to keep paying the astronomical amount we are for healthcare.”

According to the NJBIA survey, these rising costs are a growing concern to business owners as they weigh the pros and cons of offering employee coverage. A full 94 percent said price is the biggest reason they may discontinue insurance benefits in the future.

The poll also detailed exactly how businesses have made workers responsible for a growing portion of their health insurance costs, either through direct expenses or reductions in other benefits, like wages. Three in 10 businesses froze pay or capped increases; a similar ratio raised the employee’s share of the healthcare premium costs; and roughly four in 10 introduced a high-deductible plan, or increased the deductible level or other patient costs.

“You can see the trend in shifting costs from the employer over to the employee,” said Michele Siekerka, NJBIA’s president and CEO. For one, businesses are “starting to offer plans that aren’t as attractive in order to keep the costs at bay.”

A particular concern for Siekerka was the negative impact healthcare costs are starting to have on wages. Benefits must be viewed comprehensively, she said, and state policymakers need to be aware of the nexus when considering mandates for higher hourly wages or additional healthcare.

“Wages and benefits are all one,” Siekerka said. “The cost of business is getting more and more challenging. I think small business is really at a breaking point.”

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