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Cost shift to employees, especially families, isn’t abating
Employees saw modest health plan premium rate increases in 2015, but their out-of-pocket costs continued to rise sharply, according to preliminary results from the
2015 United Benefits Advisors (UBA) Health Plan Survey, released in November 2015.
The annual benchmarking survey of U.S. employer-sponsored health plans is conducted by United Benefits Advisors (UBA), a network of employee benefits brokerage and advisory firms. The 2015 survey, with responses from 18,186 health plans sponsored by 10,804 employers, included small to midsize employers that makes up the majority of American business, so the findings may differ from other surveys that focus exclusively on large employers.
In 2015, the average annual health plan cost per employee for all plans was $9,736, up 2.4 percent from 2014 and relatively flat from the previous year’s 2.2 percent increase. Employers passed slightly less than half (45 percent) of this year’s increase on to employees, UBA found.
All plans (average)
Source: 2015 UBA Health Plan Survey.EPO—exclusive provider organization;
PPO—preferred provider organization;
POS—point of service plan;
HMO—health maintenance organization;
CDHP—consumer-directed health plan.
The overall rate growth was relatively modest in part “because of employees enrolling in plans that weren’t as rich,” such as higher-deductible, lower-premium consumer-directed health plans (CDHPs), according to the survey report.
CDHPs have aided employers in containing health care costs without necessarily leading to more expensive health care for patients,
SHRM Online reported earlier this year, based on research by the nonprofit National Bureau of Economic Research. That’s because CDHPs typically combine high deductibles with tax-preferred health savings accounts (HSAs) that employers and employees can contribute to, or with health reimbursement arrangements (HRAs) that are fully funded by employers.
As in the past, a big difference remains in the U.S. between an employer’s cost to insure employees in the Northeast versus in the Central states and the South. As noted, in 2015 the average annual cost per employee in the U.S. was $9,736, but regionally the average per employee cost was:
• Northeast: $11,071, upfrom $10,931 in 2014.
• North Central: $10,390, up from $10,130.
• West: $10,152, up from $9,513.
• Southeast: $8,431, up from $8,254.
• Central: $8,224, up from $8,088
Among other key findings from UBA’s survey showed that in 2015 on average across the U.S.:
• Median in-network deductibles for singles rose 33 percent to $2,000, up from $1,500 in 2014; in-network deductibles for families were unchanged at $4,000.
• Median out-of-network deductibles for families rose 16.7 percent to $7,000, up from $6,000 in 2014; out-of-network deductibles for singles remained unchanged at $3,000.
The jump in deductibles is even starker when viewed over the last five years. From 2000 through 2015:
• Median in-network single deductibles doubled, and single out-of-network deductibles increased 50 percent.
• Median in-network family deductibles rose 33 percent and family out-of-network deductibles jumped 75 percent.
Zeroing in on 2015, both singles and families saw large increases in median in-network out-of-pocket maximums (up $500 and $700, respectively, to $4,000 and $8,700).
Families bore the brunt of the increase in median out-of-network, out-of-pocket maximums, going from $16,000 in 2014 to $18,000 in 2015, while singles increased from $8,000 to $9,000. “If we only look at slices of the health insurance market, it might appear that costs have remained relatively steady. A closer look at how much of the cost has been shifted to employees, however, reveals a much different story,” said Les McPhearson, CEO of UBA, in a news release. “Out-of-network expenses are not subject to [Affordable Care Act] limitations, which means they’ll likely continue to increase significantly as employers continue to shift a greater share of expenses to employees through out-of-pocket cost increases and reductions in family benefits.”
Among other health coverage trends highlighted in UBA’s report:
• Eligibility for coverage. Consistent with the last few years, when employers aren’t required to offer coverage, they don’t. Less than 10 percent of employers provided coverage to employees working fewer than 30 hours per week.
• HSA enrollment is up. There was a 10.7 percent increase in the number of individuals enrolled in HSAs, likely due to the increase in CDHP enrollment. The average employer contribution to an HSA was $491 for a single employee and $882 for a family.
• Bonuses to waive coverage. Only 2.9 percent of employers offered a bonus to employees to waive medical coverage. Among those who did make the offer, the average annual single bonus was $1,680.
• Grandfathering. Only 7.8 percent of plans are still considered grandfathered plans that can avoid some (but not all) coverage requirements under the Affordable Care Act (ACA), down from 8.2 percent in 2014. Grandfathered plans are those with unchanged major provisions since March 23, 2010, the date of the ACA’s enactment.
• Self-funding. Overall, 12.2 percent of all plans were self-funded, nearly an 11 percent increase from 2014. “UBA partners believe that self-funding will be increasingly desirable to employers of all sizes in the coming years as a way to avoid various cost and compliance aspects of health care reform,” according to the report.
Going forward, “Overall, rates are expected to rise and employers will continue to reduce benefits and pass costs to employers,” UBA predicted.
Despite Cost Shifting, Benefits Still Valued
In another report released in November, HR consultancy Mercer found that two-thirds of U.S. workers were satisfied with current health coverage available to them, but concerned about the future affordability of those benefits.
Only 41 percent of employees expect their health care to be affordable five years from now, according to Mercer’s
Inside Employees’ Minds Survey, conducted among more than 3,000 U.S. workers.
“Employees of all types continue to value benefits, with 9 in 10 saying they are just as important as getting paid,” said Gillian Printon, senior partner in Mercer’s health and benefits business in the San Francisco Bay area. “This is remarkable despite a marked shift toward greater cost sharing with employees and a perception that benefits are less robust today than in the past. Combined with younger generations seeking more flexible offerings, this study suggests we have an increasingly benefit-savvy working population that is accepting shared accountability but with grave concerns over affordability in just a few short years.”
ACA's Impact on Plan Administration
Finally, new findings from the third annual
Guardian Workplace Benefits Study, sponsored by the Guardian Life Insurance Co. of America, also were released in November. Highlights from a survey of 1,001 employee benefits decision-makers revealed that:
• One in three employers expects to outsource more aspects of their benefits program as a direct result of the ACA’s compliance and reporting requirements.
• 78 percent of employers expect benefit cost increases due to the ACA in the future, which will affect the design of their health benefits.
• Of those thinking of self-insuring, 58 percent say the ACA is the impetus and half of those planning to self-insure expect to carry stop loss insurance.
Additional Health Benefit Findings
November 2015 has proved to be a busy time for releasing health benefit studies. Additional findings that can help HR managers benchmark their plans, or suggest design changes, follow below:
More evidence of faster HSA growth. The number of health enrollees in high-deductible health plans (HDHPs) with HSAs rose to nearly 19.7 million in January 2015, up from 17.4 million in January 2014, according to the
2015 Census of Health Savings Account—High Deductible Health Plans by America's Health Insurance Plans (AHIP), a national trade association. Most HSA enrollment gains were in large group plans, AHIP found. The share of HSA/HDHP lives enrolled in large group plans jumped from 68 percent in January 2013 to 74 percent in January 2014 and to 78 percent in January 2015.
More evidence of lower rate hikes, increased cost-shifting. After plan design changes and vendor negotiations, a new
analysis by consultancy Aon Hewitt shows the average health care rate increase for midsize and large companies was 3.2 percent in 2015, marking the lowest rate increase since Aon began tracking the data in 1996. Aon projects average premium increases will jump to 4.1 percent in 2016.
Data from the Aon Hewitt Health value Initiative database, which captures health care cost and benefit data for more than 600 large U.S. employers, further reveals that despite the low rate of increase:
• The average
amount that employees need to contribute toward their health care has increased more than 134 percent over the past decade.
• 18 percent of companies have
reduced subsidies for covered dependents, while 17 percent added a surcharge for adult dependents with access to other health coverage.
• 43 percent of companies are
considering using unitized pricing—where employees pay per person and not individual versus family.
• HDHPs are now the
second most popular plan choice offered by companies, surpassing HMOs.
• 16 percent of companies
offer a HDHP as the only health plan option today, and another 41 percent are considering doing so in the next three-to-five years.
Likewise, 86 percent of large U.S. employers plan to offer CDHPs that combine a deductible plan with an HSA or HRA in 2016, up from 54 percent five years ago, according to the
2015 Towers Watson/NBGH Best Practices in Health Care Employer Survey report from consultancy Towers Watson and the nonprofit National Business Group on Health (NBGH), which also found that enrollments in CDHPs has more than doubled, from 20 percent to 43 percent over the last five years
Respondents to this survey expect total health care costs (employer and employee) to reach $12,041 per employee per year in 2015, up 4.1 percent from $11,567 in 2014, and to rise nearly 5 percent to $12,643 per employee in 2016.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Follow me on Twitter.
Related SHRM Articles:
‘Carving Out’ Spousal Benefits: Cost-Cutting, with Repercussions,
SHRM Online Benefits, November 2015
Smaller Hikes in Health Premium Rates Forecast for 2016,
SHRM Online Benefits, September 2015
Related News Article:
Workers Shoulder Bigger Portion of Health Care Costs, NBCNews.com, November 2015
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