Larger Increases in Health Premiums Expected

2015 premium jump projected to outpace this year’s, with continued cost-shifting

By Stephen Miller, CEBS Nov 17, 2014

updated 11/21/2014

U.S. companies saw a relatively modest uptick in health plan costs in 2014, but premiums will see a sharper increase next year, new research shows.

For 2015, the average health care premium adjustment for midsize and large U.S. companies will be 5.5 percent after plan design changes and vendor negotiations aimed at curtailing costs, consultancy Aon Hewitt projects, up from 4.4 percent in 2014.

For 2015, the data from midsize and large employers further reveal that:

Average health care costs are projected to increase to $11,304 per employee, up from $10,717 in 2014 and $10,266 in 2013.

Employees will be asked to contribute 23.6 percent of the total health care premium, which equates to $2,664. The portion of the total health care premium that employees were asked to contribute in 2014 was $2,487, up from $2,355 in 2013.

Average employee out-of-pocket costs, resulting from co-payments, co-insurance and deductibles, are expected to hit $2,487, up from $2,295 in 2014 and $2,005 in 2013.

These projections show that over the last five years, employees’ share of health care costs—including premium contributions and out-of-pocket costs—will have increased more than 52 percent, from $3,389 in 2010 to $5,151 in 2015.

“Over the past few years, the overall economic situation kept consumer spending on discretionary items—including health care—down, and we observed a lower rate of premium increases,” said Tim Nimmer, chief health care actuary at Aon Hewitt, in a statement announcing the findings. “Now, with employment rates stabilizing, individuals are feeling more secure about their financial situation and have been willing to re-engage in using the health care system. As these utilization rates increase, we expect to see health care cost increases follow.”

The tables below show average plan premium costs over the past five years for health maintenance organizations (HMOs), point of service (POS) plans, and preferred provider organizations (PPOs), along with national averages for all plan types.

Costs by Plan Type

Costs are plan costs (premium or budget rate) per employee. They include employees’ contributions but not their out-of-pocket costs (i.e., co-payments, co-insurance).

Year

HMOs

POS plans

PPOs

All Types

2015

(projection)

$11,386

$12,344

$11,141

$11,304

2014

$10,762

$11,711

$10,570

$10,717

2013

$10,356

$11,101

$10,127

$10,266

2012

$9,876

$10,621

$9,862

$9,934

2011

$9,360

$10,232

$9,420

$9,473

2010

$8,665

$9,176

$8,708

$8,729

2009

$8,054

$8,511

$8,285

$8,217

Annual Premium Increases

Year

HMOs

POS plans

PPOs

All Types

2015

(projection)

5.8%

5.4%

5.4%

5.5%

2014

3.9%

5.5%

4.4%

4.4%

2013

4.9%

4.5%

2.7%

3.3%

2012

5.5%

3.8%

4.7%

4.9%

2011

8.0%

11.5%

8.2%

8.5%

2010

7.6%

7.8%

5.1%

6.2%

2009

6.1%

5.5%

4.5%

5.0%

Source: Aon Hewitt

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Average Employee Premium and Out-of-Pocket Contributions

Year

Average Employee Premium Contribution

Average Employee Out-of-Pocket Costs

2015

(projection)

$2,664

$2,487

2014

$2,487

$2,295

2013

$2,355

$2,005

2012

$2,250

$1,777

2011

$2,134

$1,673

2010

$1,967

$1,422

2009

$1,835

$1,276

Source: Aon Hewitt



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Another 2015 Cost Projection

According to results from Mercer’s annual National Survey of Employer-Sponsored Health Plans, also released in November, total health benefit cost for U.S. employers averaged $11,204 per worker in 2014. This includes employer and employee contributions for medical, dental and other health coverage.

In the survey, employers predict that in 2015 their health benefit cost per employee will rise by 4.6 percent on average, which reflects changes they will make to reduce cost; if they made no changes to their current plans, they estimate that cost would rise by an average of 7.1 percent.

Mercer’s nationally projectable annual survey includes public and private organizations with 10 or more employees; 2,569 employers responded in 2014. (Click on graph below to view larger version.)

Cost-Controlling Steps

Employers are reducing costs by implementing a mix of traditional and nontraditional approaches, Aon Hewitt found, such as those described below.

Managing Dependent Eligibility and Subsidies

The analysis shows a shift toward reduced eligibility and subsidies for spouses and dependents:

22 percent of companies have reduced subsidies for covered dependents, while 18 percent added a surcharge for adult dependents with access to other health coverage. Moreover, half of all companies are exploring such approaches over the next few years.

52 percent of companies are considering using unitized pricing—where employees pay per person, and not individual versus family.

58 percent of companies have completed a program audit of covered dependents to ensure only those who are eligible will remain on the plan.

(For more on this trend, see the SHRM Online article Coverage for Spouses and Dependents Scaled Back.)

Steering Employees to High-value Providers

An increasing number of companies have adopted or plan to adopt, within three to five years, various strategies for promoting the use of high-value, cost-effective health providers:

24 percent of companies currently steer participants (through plan design or lower cost) to high-quality hospitals or physicians for specific procedures or conditions, and another 56 percent are considering doing so in the future.

18 percent use integrated delivery models such as patient-centered medical homes to improve primary care effectiveness, and another 56 percent plan to do so.

10 percent have adopted reference-based pricing—where employers set a pricing cap on benefits for certain medical services for which wide cost variation exists with no discernible differentiation in quality. Another 58 percent plan to do so.

High-Deductible Health Plans (HDHPs)

HDHPs were the second most popular plan choice offered by companies, surpassing health maintenance organizations (HMOs). Fifteen percent of midsize or large companies now offer an HDHP as their only health plan option, and another 42 percent are considering doing so in the next three to five years.

(For more on this trend, see the SHRM Online article CDHPs Enroll Nearly a Quarter of Covered Employees.)

“Gating” Health Benefits

More than 60 percent of companies plan to “gate” employees to richer plan designs in the future. This strategy requires employees to complete a task to access the richer design options. For example, companies may offer a basic high-deductible plan to their entire workforce, but make a richer PPO option available to those employees who complete a health risk questionnaire or biometric screening.

Many Skip Needed Care Because of Costs

Twenty-one percent of adults with health insurance spent 5 percent or more of their income on out-of-pocket health care costs over the past year (excluding premiums), and 13 percent spent 10 percent or more, according to a November 2014 report by the Commonwealth Fund, a private foundation that promotes access to affordable health care.

A majority of Americans surveyed for the study,Too High a Price: Out-of-Pocket Health Care Costs in the United States, had employer-sponsored health insurance, but the sample also included people with Affordable Care Act marketplace plans, individual health insurance, Medicaid or other coverage. According to the findings:

Adults with the lowest incomes were the most likely to skip needed care. Forty-six percent of people earning less than $22,980 a year cited at least one example of skipping needed health care because of their plan’s co-payments or co-insurance: 28 percent did not fill a prescription; 28 percent skipped a medical test or follow-up treatment; 30 percent had a medical problem but did not go to the doctor; and 24 percent did not see a specialist when they or their doctor thought they needed one.

When deductibles are high relative to income, many people skip needed care. Forty percent of privately insured people whose deductibles represented 5 percent or more of their income cited at least one example of skipping needed health care because of their deductible: 29 percent skipped a medical test or follow-up treatment; 27 percent had a medical problem but did not go to the doctor; 23 percent skipped a preventive care test; and 22 percent did not see a specialist despite being advised to do so by their physician.



Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.

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