Companies Shifting Health Costs to Better-Paid

The soaring cost of health care has forced many companies to put the bulk of these costs on higher paid employees, so as to provide some relief to lower paid workers. With each passing year, employees have been paying more and more towards health care. This is because, many companies pass on the rising costs of health care to their workers.

Rising Health Costs
On average, a worker has to pay about $4,000 annually for a family health policy. This amount is only going to rise in the coming years. This cost is prohibitive for low salary workers struggling in a tough economy.

Vanderbilt University Example
Many companies have recognized the impact of health insurance on lower paid workers. Therefore, they are trying to help these workers by making higher-paid employees to bear more health insurance expenses. For example, Vanderbilt University has ensured that employees earning less than $50,000 pay the same premiums for next year. Those earning more will be required to shell out an extra $75 each month.

Workers Bear the Brunt
Previously, companies used to absorb some of the higher health costs. But of late, workers have been made to bear the brunt. In 2010, workers have to pay an average of 14% more for a family policy. This works out to an extra $500 deducted annually from their paychecks.

Bank of America Example

Many companies are tying health premiums to employees’ wages. Some corporations are doing their best to save their lowest-paid employees by increasing health care costs on others. For instance, at Bank of America, employees earning more than $100,000 annually will need to pay at least 14% more for health coverage in 2011. This will benefit those who are earning less than $50,000, as their health deductions could drop by about 50%, compared to last year. The bank will pay the difference amount.

Tiered System to Share Costs
Vanderbilt University typically bears about 80% of employees’ health coverage. Its employees only need to pay monthly premiums of between $41 to $370. General Electric has for long adopted a tiered system to determine how much each employee needs to pay for health insurance. Many companies are trying to save low-income workers from rising health costs by passing on the increase to high-income employees. Unions also pay a role as they negotiate benefits for their members.

Health Costs Outstrip Incomes
Health care increases have been outstripping rise in incomes. Since 2005, incomes have risen 18%, but employees’ contributions to health premiums have increased 47%. Companies are thus being forced to make their employees bear higher health costs. To compound the problem, sometimes health care charges are so confusing that they cloud how much extra employees are paying.

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