Employees in the Kansas City, Missouri, area are opting out of employer-sponsored health insurance in favor of individual coverage, a trend that could spread to other regions, according to brokers and the local offices of BlueCross BlueShield of Kansas City.

Roger Foreman, chief marketing officer at the health insurance organization, says a surge in applications for individual health insurance during the past year has coincided with small employers dropping coverage and large employers shifting more of the cost to employees.

Foreman says 18 percent of the group's customers have chosen individual coverage, compared with the 9 percent average across BlueCross Blue¬Shield plans nationwide.

The rise in the cost of family coverage is a major factor, he says. Parents are opting to be covered as an individual under their insurer, then buy health insurance for their children in the individual market. This has caused a boom in the number of individual policies being taken out for children, which represents 40 percent of new business in the individual market, Foreman says.

"As we spoke to people, they would say dependent costs are getting so high, I can't afford to cover my children," he says.

It costs about $60 to $80 a month per child to buy health insurance through BlueCross BlueShield of Kan¬sas City. For parents with one child, individual coverage can be less expensive than family coverage through an employer, especially if an employer offers a high-deductible health plan, says Jim Heckman, a broker in Kansas City.

"It's the same cost if a person has one kid or four," he says. "Especially if you have one child, it's less expensive to go on an individual plan rather than a group plan."

In recent years, health care cost increases have stabilized, allowing small employers to continue to offer health care. The cost that employees pay in premiums has increased at a higher rate at large companies, according to the Kaiser Family Foundation. Premiums paid by employees at large employers increased by 6.4 percent last year; at small employers, the increase was 5.5 percent.

Employees opting out could increase health care costs for employers, says heath care consultant Brian Klepper, if sick children remain under an employer's health plan while the healthy ones turn to cheap individual coverage.

"The way it often works is that if you have a fragmented market, the people who hang in there are the ones who can't get coverage anywhere [but through their employer]," Klepper says. "And that ends up being bad risk."

Klepper says companies are better off finding health care savings in ways that don't shift costs to employees.

Source: Workforce.com

Being a worker isn't getting any easier. We're moving from traditional pensions to 401(k)s, full-scale health insurance to consumer-driven health plans and steady annual salary increases to one-time "pay for performance" bonuses and incentives.

Base salaries are expected to increase about 3.9% on average in 2008, matching the average pay increase in 2007, according to a new Towers Perrin survey of about 4,000 companies worldwide. Those results match a number of other salary-expectation surveys.

It's not much when you consider inflation in October rose at a 3.5% annual rate. But more employers now supplement salaries with one-time bonuses and rewards, with more than 90% of employers offering such "variable pay" this year, up from 80% in 2006, according to an annual survey of about 1,000 large U.S. employers by Lincolnshire, Ill.-based Hewitt Associates, the human-resources consulting firm.

Spending on such programs hit almost 12% of employers' payroll budgets on average this year, up from 9% in 2003, and Hewitt expects that figure to top 12% in 2008.

So, there is money available beyond traditional salary hikes, but it's only available to certain workers who meet and exceed companies' performance expectations.

On average, hourly and professional technical employees can expect employers to dole out bonuses of between 5% and 10% of base pay, entry-level professionals and midlevel managers, 10% to 20% of pay, and senior managers through executives, anywhere from 20% to 80% or higher. But of course, that pay is targeted to top performers.

The projected salary increase for 2008 is "very mild growth," said John Irons, director of research and policy at the Economic Policy Institute, a liberal think tank.

And surprisingly mild when you consider how robust productivity gains are: U.S. nonfarm workplace productivity jumped at an annual rate of 6.3% in the third quarter, the fastest growth in four years, the U.S. Labor Department reported

- Excerpts from Careerjournal.com article by Andrea Coombes