Cost increases for
Unfortunately it’s the small employers with under 200 employees that feel the rising premium affects the worse and as a result fewer and fewer are able to afford to offer employee healthcare benefits.
Group health plan costs increased 6.1 percent this year to an average of $7,983 per employee, up from $7,523 last year, according to a survey of nearly 3,000 employers released last month by Mercer.
That marks the third consecutive year that health care plan costs have increased 6.1 percent. While that is roughly double the rise in the Consumer Price Index, it is a big improvement from just a few years ago, when annual health plan increases were rising by double digits and employers despaired about their seeming inability to bring costs under control. In 2002, for example, costs jumped an average of 14.7 percent; in 2003, costs climbed an average of 10.1 percent.
And the easing of health care inflation (if ’easing’ is a term that can apply) is likely to continue. In 2008, survey respondents expect costs to increase an average of 5.8 percent after taking into account changes they will make in plan designs as well as other factors.
To offset rising deductibles, more and more employers now offer consumer-driven health care plans (CDHPs), which expose employees to big health care costs through high deductibles. The plans, though, do more than raise deductibles.
The plans are linked to accounts—either health savings accounts (HSAs) or health reimbursement arrangements (HRAs)—that employees can tap to pay uncovered health care expenses, including deductibles. In both accounts, unused amounts roll over to pay expenses in succeeding years, and employees can keep HSA balances, even after they leave a company, and apply them to future medical expenses, including during retirement.
The lower cost of CDHPs have gotten employers’ attention, especially the nation’s largest companies. This year, 29 percent of respondents with at least 20,000 employees offered an HSA, up from 22 percent last year; 31 percent of the largest employers say it is likely they will offer an HSA-based CDHP next year.
Employee enrollment in CDHPs, while still low, also is growing. In 2005, just 1 percent of employees were enrolled in CDHPs, but that figure climbed to 3 percent in 2006 and reached 5 percent in 2007.
Still, even if increases are remaining steady, the cost of providing coverage is more than a growing number of smaller employers can afford. Last year, 61 percent of employers with fewer than 200 employees offered health care coverage, down from 66 percent in 2003 and 69 percent in 2001.
Even a 6 percent increase, year after year, can eventually make providing health care coverage unaffordable for smaller employers.
Source: Jerry Geisel, Business Insurance, a sister publication of Workforce Management.
