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In 2012, U.S. companies and their employees saw the lowest health care premium rate increases in six years, according to an analysis by consultancy Aon Hewitt. The average health care premium rate increase for large employers in 2012 was 4.9 percent, down from 8.5 percent in 2011 and 6.2 percent in 2010. In 2013, however, average health care premium increases are projected to jump up to 6.3 percent.
Aon Hewitt's analysis showed that in 2012:
2013 Costs Forecast
For 2013, average health plan premium costs per employee are projected to jump to $11,188, of which average employee contributions to the health plan premium would be $2,385. In addition, average employee out-of-pocket costs (co-pays, co-insurance and deductibles) would be $2,429.
Over the last five years, employees’ share of health care costs—including employee premium contributions and out-of-pocket costs—have increased more than 50 percent from $3,199 in 2008 to $4,814 in 2013, according to the analysis.
“Employers have seen some stabilization in employment levels, less severe impact of high cost claims, a general movement towards consumer-driven plans and greater clarity around the average cost impact associated with health care reform. As a result, 2012 premiums were offset to reflect the better than expected historical experience. For 2013, we expect premium increases to gravitate back to the 6 percent range,” said Tim Nimmer, chief health care actuary at Aon Hewitt, in a media statement.
Costs by Plan Type
On average, Aon Hewitt forecasts that companies will see 2013 cost increases of 7.0 percent for health maintenance organization (HMO) plans, 6.1 percent for preferred provider organization (PPO) plans and 6.1 percent for point-of-service (POS) plans. From 2012 to 2013, the average cost per person for major companies is estimated to increase from $10,659 to $11,405 for HMOs, $10,433 to $11,069 for PPOs and $11,062 to $11,737 for POS plans.
Cost Increases by Metro Area
In 2012, major U.S. markets that experienced rate increases higher than the national average included San Antonio (7.4 percent), San Francisco/Oakland/San Jose (7.4 percent), Los Angeles (7.2 percent) and Austin (6.5 percent). Conversely, Dallas (3.4 percent), Cincinnati (3.6 percent), Denver (4.5 percent), New York City (4.5 percent), Washington, D.C. (4.7 percent) and Philadelphia (4.9 percent) experienced lower-than-average rate increases in 2012.
Employer Actions Mitigate Costs
As the health care landscape shifts, employers are taking the opportunity to reassess their role as a health care benefits provider and subsidizer, while redefining their role in the health, safety and performance of their workforce. According to a 2012 Aon Hewitt survey of nearly 2,000 U.S. employers representing over 20 million U.S. employees and their dependents, most employers plan to continue sponsoring a medical plan for their employees. However, they are migrating from a traditional “managed trend” approach to a “house money/house rules” approach that integrates a pay-for-performance philosophy into their benefit programs. This strategy includes elements of:
While still an emerging trend, a growing number of employers are interested in a corporate health care exchange model, which enables employers to manage the growth of their subsidy and allows employees to select from a greater set of health plan alternatives. While state-operated exchanges under health care reform will not be available to employers with more than 100 employees until at least 2017, organizations are exploring alternate health care models, such as corporate exchangesthat allow employees to select from a greater set of health plan alternatives. Aon Hewitt found that more than 40 percent of employers are considering moving to a health care exchange model in the next three-to-five years.
Health plan per capita claims cost rates for 2013 are expected to decline, with projected claims cost increases dipping into single digits for most medical plans and all types of prescription drug plans, according to the 2013 Segal Health Plan Cost Trend Survey
“While medical and prescription drug [claim cost rate increase] trends are projected to decelerate in 2013, we don’t know if deceleration is a long-term trend or a temporary result of current economic forces. We question whether medical care that is being delayed or avoided could lead to higher rates of undetected or untreated conditions in the future,” Edward A. Kaplan, senior vice president and national health practice leader at Segal, an HR consultancy, noted in a media statement.
Among the survey findings:
Changes in the costs to plan sponsors can be significantly different from projected claims cost trends, reflecting such diverse factors as group demographics, changes in plan design, administrative fees, reinsurance premiums and changes in participant contributions, according to Segal.
To better control cost increases, Kaplan recommended that plan sponsors focus on:
Health care costs are projected to increase by 5.3 percent in 2013 (down from the 5.9 percent projected for 2012), according to Health Care Changes Ahead, an October 2012 research report by HR consultancy Towers Watson.
Without changes to medical and pharmacy plan designs, vendors, provider networks and other programs, the increase would have been 6.5 percent for 2013, Towers Watson found. Total per-employee costs are expected to be $11,507, representing an employer cost of $8,911 and an employee cost of $2,596.
Similarly, a June 2012 survey by the National Business Group on Health showed that the largest U.S. corporations expect health care premiums to rise 7 percent in 2013. In response, employers are eyeing a variety of cost-control measures including asking workers to pay a greater portion of premiums and sharply boosting financial rewards to engage workers in healthy lifestyles (see the SHRM Online article "Large Employers Expect Health Benefits to Increase 7 Percent in 2013.")
Stephen Miller, CEBS, is an online editor/manager for SHRM.
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