Survey: Phila.-area employees have better health coverage - and it costs more

Posted: November 18, 2010

When it comes to health benefits, it's the same old Philadelphia story.

Long relationships between employers and employees coupled with loyalty to tradition - or maybe it's inertia - mean Philadelphia-area employees tend to have better, more expensive coverage than their counterparts around the nation.

"Employers [here] have a more paternalistic approach," said Jennifer Calhoun Mohl, a principal in Mercer L.L.C., a national benefits-consultancy firm that released results of a national survey Wednesday.

Nationally, the cost of health benefits rose 6.9 percent in 2010 to $9,562 per employee, the biggest increase since 2004, according to the survey of 2,836 employers.

In the tristate area, the price tag for health benefits rose more - 8.4 percent for an average cost of $10,656 per employee, per year.

Part of the reason, Calhoun Mohl said, is the standard Philadelphia culture. Employees stay with the same company for a long time. Relationships are longer, leading to a stronger feeling of obligation on the part of employers.

"When we have conversations about benefits, they really do evaluate and struggle with passing costs on to employees," she said from Mercer's Philadelphia office.

Case in point: Employers everywhere are shifting more health insurance costs onto employees, either making them pick up an increasingly larger share of the premiums, or requiring larger deductibles and co-pays.

Nationally, deductibles in preferred-provider organization plans averaged $1,200 this year. Locally, that average deductible is just $300.

"Employers [here] have a long history of offering comprehensive benefits," she said. "We've seen the law of inertia." The result: Companies here stick with higher-cost plans well after they have gone out of favor elsewhere.

But there are other factors.

"In the Northeast, there's a higher cost of living, and that's true for medical care as well," said Renee Hackett, a Mercer consultant.

Also, employees tend to take advantage of the region's sophisticated and costly medical care. "It is definitely an accurate assumption that the cost of receiving care is more expensive because we have these really good teaching hospitals," she said.

Also, she said, union companies tend to offer better benefits, setting a higher standard for competitors.

After being slow to accept them, Philadelphia has slightly outpaced the nation in its adoption of high-deductible plans, the so-called "consumer-driven health plans."

The idea behind them is that consumers will watch their medical spending more when it is coming out of their pocket. Then, when fewer health services are used, employer costs decline, whether or not that's medically wise.

Since the advent of these plans at least a decade ago, more employers are contributing money toward deductibles by setting up health savings accounts.

The plans cost 25 percent less, so they are popular with employers, but with some cash from their employers, more employees are accepting them as well.

Employers say that initial requirements of the federal health legislation will increase benefit costs up to 2 percent, part of a predicted 10 percent increase in 2011.

To cope, most will switch insurers, change plans, and pass on even more costs on to employees, the survey said.

Many are increasingly looking at wellness programs, providing financial subsidies to those who participate.

More companies are offering benefit discounts to nonsmokers.

Part of the strategy, the report said, is an increasing emphasis on wellness programs. More than one in four employers is now providing a substantial financial incentive for employees to participate. Gone are cute hats and water bottles. In their place is cash or a $180 reduction in the employee's contribution to the premium. In an increasing number of companies, nonsmokers pay less toward their insurance.


Contact staff writer Jane M. Von Bergen at 215-854-2769 or jvonbergen@phillynews.com.

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