Valley workers feel pain of costlier coverage

Employers pass higher health care costs on to their employees.

Published online on Monday, Nov. 02, 2009

It's open-enrollment time, when employers ask workers to select health-care coverage for the coming year, and insurance premium rate increases are in the double-digits for most companies in the central San Joaquin Valley.

In this recession, higher insurance premiums are an increased financial burden that both employers and workers will shoulder.

On average, insurance premiums in the central San Joaquin Valley are 10% to 15% higher than last year, said Tom Nelson, owner of Hallmark Insurance Inc., an independent agency that helps businesses find affordable insurance.

The Valley's increases are higher than nationwide, but in line with California, Nelson said.

Insurance premium increases could not come at a worse time for employers or employees. As employers struggle to keep businesses afloat, many have little choice but to ask workers to pay a higher percentage of monthly premiums or to pay bigger yearly deductibles, co-payments or co-insurance costs, Nelson said.

"The employer is getting hit on both ends," he said. "The amount of business he's doing is going down, that means his profits are going down, and his premiums are going up."

But charging employees a bigger share of the cost means smaller monthly paychecks for workers who have seen incomes shrink in the last two years with furloughs, pay reductions and wage freezes.

Big employers as well as small are seeing higher insurance costs.

Up until a few years ago, Fresno County paid the full cost of health insurance premiums for almost 6,000 employees, but workers now pick up part of the increasing costs.

The county is in negotiations with employees and has yet to finalize how much they will contribute for coverage next year, but the county says rates could go up 9% to 19%, depending on which health plan is chosen.

"These are not times of plenty so everything has an impact, and we're trying to lessen the blow of what those impacts are on both sides," said Kevin Smith, internal work-site organizer for Service Employees International Union Local 521. The union represents county workers from office assistants to correctional officers.

Increases for insurance premiums were not unexpected.

Health-insurance costs nationwide have continued to rise year after year. Since 1999, the average insurance premium for family coverage has increased 131%, according to the 2009 Employee Health Benefits Survey by the Kaiser Family Foundation and the Health Research & Educational Trust.

During the decade, the annual premium cost for family coverage paid by employees has increased from $5,791 to $13,375.

The increase is more than four times the rate of inflation and more than three times the rate that wages have increased over that same period, said Bianca DiJulio, a senior policy analyst with the Kaiser foundation.

This year, premiums for families are about 5% higher nationwide, DiJulio said.

Valley rates are up more than they are nationwide, but that is no surprise, said Nelson. California tends to have higher insurance rates than the rest of the country, he said. The cost of providing health care is higher in the state because the cost of living is higher, he said.

The California Association of Health Plans, an industry trade group that represents health plans in the state, said several factors contribute to the increase in rates, including higher hospital and doctor costs and increasing costs for pharmaceuticals, diagnostic equipment and medical equipment.

The federal government also drives up costs by underpaying hospitals and doctors for Medicare and Medi-Cal patients, said Patrick Johnston, the association's president. Commercial insurance companies must make up the difference in the programs' low-reimbursement rates to providers who treat the elderly and the poor, Johnston said.

Employers can pick up only so much of the increased health-insurance premium costs, Johnston said. Since the recession, 20% of employers have said they have reduced the scope of benefits or increased the share of costs for employees, he said.

Some employers are waiting for Congress to adopt a health-reform package before making changes in health insurance. At Harris Farms, open-enrollment occurred in August for the farming company's 1,600 employees.

"We took the stand in August that with all the changes that are coming or potentially coming from the federal government side, and we have one union contract that is coming due in June, that we left all our benefits intact and left all our premiums as they were," said Mike Casey, Harris' vice president of risk management and human resources.

For other employers, premium increases have meant hard choices.

Kim Hensen, human resources manager at Provost & Pritchard Consulting Group, said the business had to increase the cost of premiums for dependent care for its 133 employees.

The engineering company covers the full cost of the premium for employee health-care insurance, she said, but the employee shares the cost of coverage for dependents.

Hensen said she looked at ways to reduce the premium, but couldn't do so without "gutting the plan."

"You don't want a plan that discourages employees from using it because they can't afford to see a doctor," she said.