Not a Member? Get access to HR news and resources that you can trust.
Don't leave the task of calculating total cost of workforce to the finance department.
Is your employee handbook ready for the changing world of work? With SHRM’s Employee Handbook Builder get peace of mind that your handbook is up-to-date.
60+ new SHRM Seminar dates in 10 U.S. cities and virtually.
Expand your influence and learn how to become an effective leader -- Join us in Phoenix, AZ, October 2-4, 2017.
Based on data from more than 6,000 U.S. organizations, the SHRM 2009 Cost of Health Care Benchmarking Study Executive Summary (published in December 2009 and available to Society for Human Resource Management members online) discusses findings related to health care plans and costs during these tough economic times.
The study reports that the average annual health care cost per covered employee in 2008 for all U.S. industries was $7,033—a 5.4 percent increase from the average health care cost of $6,670 in 2007. However, actual health care costs for any organization depend on many factors, including the level of health care coverage being offered, demographic make-up of those being insured, the percentage the organization contributes to health care premiums and the history of insurance claims the organization filed in previous years.
Organizations offered an average of two health care plans for employees to choose from, with preferred provider organizations (PPOs) remaining the more prevalent, the study found. Organizations that had two or more plans were noted to have lower median health care costs than those that offered only one plan type to their employees. By offering two or more plans, organizations might be able to save costs because employees who use health care infrequently are more likely to choose a less expensive plan with lower premiums.
Employer Contribution to Monthly Health Care Premiums for Employee-Only Coverage(by organization type)
All U.S. industries
Privately owned for-profit organization
Publicly owned for-profit organization
Source: SHRM Cost of Health Care Benchmarking Study (2009).
The number of full-time equivalent employees (FTEs) matters when it comes to health care costs, SHRM's analysis found. In small organizations (1-99 FTEs), the average employer health care contribution for monthly health care premiums for employee-only coverage was $324, vs. $280 for medium-sized organizations (1-499 FTEs) and $317 for large organizations (500 or more FTEs).
With fewer employees, small organizations have less bargaining power than larger employers. And from an insurer's perspective they might be unable to spread the financial risks the provider might incur if there are several employees who need expensive treatments. Large organizations, on the other hand, typically have more money to invest in their total rewards strategy.
Employer Contribution to Monthly Health Care Premiums for Employee-Only Coverage(by staff size)
Small (1-99 FTEs)
Medium (100-499 FTEs)
Large (500+ FTEs)
Response to Costs:Growth in Consumer-Driven Plans
Often as organizations combat higher health care costs they design health care benefits to incentivize employees to make financially sound health care choices. Traditionally, this took the form of strategies such as providing lower employee co-pays for in-network office visits.
Over the past several years, consumer-driven health care plans (CDHPs), providing financial incentives via high-deductible policies linked to health savings accounts (HSAs) or through health reimbursement arrangements (HRAs), have emerged as an innovative form of health care coverage that does a better job of reducing costs. While HRAs are owned and funded by employers, HSAs may be funded by employers or employees and, like 401(k) accounts, are fully portable with employees when they terminate employment.
Evidence exists that, in addition to employer contribution to monthly premiums, employee participation in CDHP-linked HSAs increases when employees help fund these tax-advantaged accounts. The average HSA contribution for all organizations was $1,324 in 2008.
Consumer-Driven Health Care Plans(HRAs and HSAs)
Employer contribution to monthly health care premium coverage for employee-only coverage
Percentage of premium employer pays for employee-only coverage
Percentage of premium employer pays for spouse or domestic partner coverage
Annual out-of-network deductible for employee-only coverage
Maximum lifetime benefit amount for employee-only coverage
A well-designed CDHP that covers initial health care costs will keep a similar level of coverage an employee receives while decreasing the organization's overall health care costs, the report concludes. Implementing and boosting employee participation in wellness and work/life balance programs also can improve the organization's return on investment, helping to prevent costly treatment for serious illnesses down the road through early detection and pre-empt lost productivity from unscheduled absenteeism.
The executive summary contains key metrics on health care costs and practices from an April 2009 survey of more than 3,000 randomly selected SHRM members, plus data collected in early 2009 from more than 3,000 additional organizations that together are part of the SHRM Customized Benchmarking Service.
Stephen Miller is an online editor/manager for SHRM.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Choose from dozens of free webcasts on the most timely HR topics.
SHRM’s HR Vendor Directory contains over 3,200 companies