Workers take on more expense as Valley health insurance costs increase

Health insurance costs are going up for employer-sponsored health plans, and many workers in the central San Joaquin Valley will share more of the financial burden to have coverage next year.

Small-business owners in the Valley say they have had to shop around to find plans that they and their employees can afford.

“We try to be as generous as we can with our employees, but it’s hard,” said Lori Warren, executive office manager at The United Way Fresno and Madera Counties.

Nationwide, average monthly premiums for employer-sponsored health plans are up by about 4 percent, a modest increase compared to past years, according to a survey by the Kaiser Family Foundation and Health Research & Educational Trust. In the Valley, though, some small-business owners report seeing increases in the double digits. And some insurance agents and business owners question if the increased cost of insurance will price workers out of employer-sponsored health plans.

“I had to deliver 50 percent increases the other day, and it’s hard,” said Debbie Pittman of DiBuduo & DeFendis Insurance, a Fresno company that helps employers find insurance plans for their workers.

The Boys & Girls Club of Fresno County faced such an increase, said Diane Carbray, executive director.

Carbray doesn’t know the cause of the cost spike for one of two health plans the organization offers to 97 employees. “I don’t know if we asked after we saw the price tag,” she said. “What does it matter?”

The agency’s broker, however, found a cheaper plan for 2016, Carbray said. “It’s a pretty good plan and it’s reasonable.”

Factors driving up insurance costs: Employers are switching from “grandmothered” plans to ones that are compliant with the Affordable Care Act and meet the federal standard for benefits, insurance brokers said. And rates for monthly premiums in 2016 take into consideration the age of not only the employee, but the spouse and children. In the past, only the employee’s age was considered.

And at least one large Valley employer also tags the increase to a higher utilization of benefits by employees and rising costs for prescription drugs.

Fresno County has seen a 13.42 percent increase in its Anthem Blue Cross plan, said Paul Nerland, interim director of personnel services for the county. Increases had been in the single digits for years.

Anthem spokesman Darrel Ng said the company’s rates in California overall are up 7.8 percent, which is comparable to others statewide.

Fresno County is studying the cause for the increase in its plan, Nerland said, but efforts by the county to rein in prescription drug costs have not been completely successful. “Specialty medications, which continue to come out at a rapid pace, is an area in the pharmacy field where we’re just seeing costs rise dramatically.”

County employees could face higher monthly premiums in 2016, Nerland said. Labor unions have to sign off on the increases first.

Deductibles, however, are not increasing for Fresno County employees, Nerland said.

Employers typically pay from 50 percent to 80 percent of premium costs for their employees, and to avoid hefty increases many choose plans with high annual deductibles. Typically, the higher the deductible, the lower the premium.

The shift to high-deductible plans is not new. Long gone are the days of the $250 or $500 annual deductible – the amount employees must pay before their insurance kicks in. It’s difficult now to find a deductible under $1,000.

According to the Kaiser survey, deductibles have increased 67 percent since 2010, about three times as much as premiums have risen. “Nearly half of covered workers now are covered by a plan with a deductible of $1,000 or more, and that was just 5 or 10 percent just a couple of years ago,” said Karen Pollitz, a senior fellow at the Kaiser foundation.

And employers also can contain insurance costs by not contributing to the cost for an employee’s dependent coverage.

In 2015, the average family premium is $17,545, with employers paying $12,591 and employees contributing $4,995. In comparison, for single-employee coverage, an employer pays an average of $6,251 and the worker pays an average of $1,071.

A ‘family glitch’

For low-income workers, an employer’s decision not to contribute to premium costs for dependents can block workers from getting coverage for their families through the Affordable Care Act.

Under the federal health law, a person with employer-sponsored health coverage does not qualify for a federal subsidy to help pay premiums for insurance plans on Covered California, the state’s insurance exchange created for the Affordable Care Act.

Peter V. Lee, executive director of Covered California, acknowledged what he called the “family glitch” at a Fresno stop last week. Lee was promoting Covered California open enrollment for 2016 that started Nov. 1 and continues through Jan. 31.

“Employers need to learn,” Lee said. “There’s a gap.”

Covered California may be able to help, though. Small businesses that buy health insurance through Covered California may qualify for federal tax credits for two years to offset part of their costs. The maximum credit is 50 percent of the premium expenses, or 35 percent for tax-exempt organizations.

Diane Tosi, controller at Fansler Restaurants in Fresno, said disqualifying people with employer-sponsored coverage from subsidies “is the part of the Affordable Care Act that really, really disturbs me in particular.”

Mainly for that reason, Fansler Restaurants decided that offering health insurance to its 350 Fresno employees would cause more harm than good, she said.

The company could not afford to help pay dependent coverage for workers at its three restaurants – Pismo’s Coastal Grill, Westwoods BBQ & Spice Co. and Yosemite Ranch Steak, Seafood and Roast House, Tosi said. The company also would have only been able to afford to provide a high-deductible plan to employees, she said.

A deductible or $3,500 for an individual and a $6,500 out-of-pocket maximum for expenses in a year is too prohibitive, Tosi said. Offering that type of health coverage “does the employee no good,” she said.

Fansler faces a federal penalty for not providing insurance to its employees, but Tosi said the assessment will be a lot less than the cost to provide affordable health coverage.

Now, employees can shop for health plans for themselves and their families through Covered California and many will qualify for subsidies to offset the cost of premiums, she said.

Nine out of 10 people who have signed up for insurance through Covered California get help paying premiums, Lee said. “Over one-half of those enrolled today are spending less than $100 a month on premiums.”

Penalty for no insurance

The Affordable Care Act requires all adults to have insurance. Those who do not face a tax penalty. That includes the self-employed who do not have employer-sponsored coverage and must purchase their own. And the penalties for not having health insurance can be steep.

In 2015, consumers will be fined 2 percent of income or $325 per person – whichever is greater – up to $975 per family. In 2016, the fine increases to 2.5 percent of income or $695 per person, up to $2,085 per family.

Marco Serna is upset that he may be forced to buy health insurance to avoid a big penalty.

Serna, 28, is self-employed and runs a Fresno convenience store.

He has life insurance and car insurance, but not health coverage. “I just don’t think you get a lot out of it,” he said.

He tries to live a healthy and safe life, Serna said, and he shouldn’t be ordered to pay for insurance he doesn’t want. “They’re telling me what I need, and that doesn’t really feel that all American.”

Depending on the size of the penalty, however, Serna said he probably will sign up for coverage “before they can penalize me.” He may discontinue it, however, and keep doing that over and over to avoid the penalty, he said.

Some of his friends could be facing penalties, too, he said. He can’t be sure, but he believes they have not signed up for coverage either through Covered California or employers. “But it’s not something people my age discuss.”

Insurance agents say under the Affordable Care Act, premium rates are based on age – and that’s not all bad. Younger people pay less in monthly premiums.

And the age rating system can be a benefit to some businesses.

For example, a younger work force allows an employer to offer good benefits and at a reasonable price because the premium costs, split between the employer and the employee, are lower.

Having young employees has kept premiums low at the Boys & Girls Club, which allows the organization to contribute to the deductible, Carbray said.

With the 2016 health plan secured by the insurance broker, the organization pays $3,100 of an employee’s $3,400 deductible and employees are allowed to make monthly payments for their share, which is $300, she said. Employees aren’t charged co-pays when they see a doctor or go to the hospital.

Carbray has been told the organization has one of the most generous plans offered by an employer.

The Boys & Girls Club is “making a bet” that the employees will stay healthy, she said. “And we’re really encouraging them to take the plan to get insurance.”

This story was originally published November 7, 2015 at 7:20 AM with the headline "Workers take on more expense as Valley health insurance costs increase."