Health Insurance Costs Continue to Rise, But at a Slower Pace
Premiums for employer-sponsored health insurance continue to rise faster than wages and inflation, with average family health coverage up 9 percent from last year, according to the Kaiser Family Foundation/Health Research & Educational Trust 2011 Employer Health Benefits Survey.
On average, workers across industries pay $4,129, and employers pay $10,944 toward annual premiums.
According to the National Association of Manufacturers, the rising cost of healthcare is "unsustainable." "It is threatening the ability of manufacturers to create jobs and compete in the global economy," the association said.
Don Fritzinger, vice president and COO for Singer Equities, a group of rubber products distributors and member of NAHAD, says the company has seen average increases in the high single digits over the past few years - better than in the previous years, when they saw double-digit increases.
The share of firms offering health insurance to workers is 60 percent this year, comparable to the levels in 2009 and earlier, according to the Kaiser survey.
A Towers Watson survey found that employers are planning only moderate changes in their health care plans for 2012. That survey also found that employer health care costs will rise at a "noticeably lower rate" in 2012 compared with 2011 - 5.9 percent vs. 7.6 percent, respectively.
The Employee Burden
Despite ongoing cost pressures, Singer Equities is sensitive to how it divvies up the burden of health insurance premiums between employer and employee. "Like many other distributors the employee pays a small portion of that amount, and it has an impact on them. We're very sensitive not only to the cost that's borne by the distributor but by the cost that's borne by employees, as well," Fritzinger says.
The Towers Watson survey found that roughly two-thirds of employers will increase employees' share of premium contributions for single-only coverage in 2012; 73 percent will increase them for employees with dependent coverage. A different survey by Aon Hewitt, an HR consulting business, reported that employees will contribute nearly 11 percent more to the overall health premium in 2012.
Cost shifting is expected to continue well beyond 2012, including shifting more of the cost to employees, consolidating plan choices, emphasizing account-based plans and requiring employees to do more to receive incentives, according to Towers Watson.
“Unlike the last few years when many employees saw significant increases in copayments, deductibles and coinsurance, 2012 looks like a year when we will start to see costs go up primarily via increased premium contributions, with a higher proportion of the increase being borne by families,” said Randall Abbott, senior health care consultant at Towers Watson in a news release. “Employers are becoming increasingly focused on raising the cost for dependents to capture the added expense and to encourage working spouses to shift to their own employer’s plan. We also expect more use of spousal surcharges when they fail to do so.”
Employers also continue to adopt account-based plans at a rapid rate, according to Towers Watson, with 57 percent of large employers expecting to offer this option. This means employees will need to become more familiar with the advantages and certain limitations of high-deductible plans and health savings accounts. Employees will also be required to pay more for brand-name drugs, and will have access to specialty drugs only with prior authorization and participation in other therapies.
Cost Saving Ideas
Many distributors across sectors have worked to shave costs by instituting programs to encourage healthy behavior. Programs reported by distributors in the past include smoking cessation programs; annual health fairs; health and fitness days (with rewards to employees for participating); health risk assessments including blood pressure and cholesterol screenings; and programs that encourage better disease management.
“Employers will keep their focus on improving worker health and driving employees to consider the cost of care in 2012. As a result, we expect more companies to link benefits with individual employee behaviors and benefit decisions, requiring employees to be more accountable for their own choices,” said Abbott of Towers Watson. “Employees who make smart decisions about their health care providers and prescription medications will be able to boost employer subsidies and incentives.”
Fritzinger says Singer Equities businesses have implemented various wellness programs, incentivizing employees to go to health clubs, for example, or providing ways for employees to de-stress during the workday.
Werner Electric Supply, an electrical products distributor recently featured in Modern Distribution Management, developed a program with its partner company Van Meter Industrial at seven locations focused on wellness. The company uses exercise challenges to motivate employees, including a popular event The Better Health & Biggest Loser Challenge. Increases in employee insurance costs for the self-insured company were miniscule from 2008 to 2010, rising 3 percent overall. This meant a $1 increase per pay period for those with a single health plan and about a $3 increase for those with the family plan.
Impact of 'Obamacare'
The Kaiser survey also looked at employers’ experiences with already implemented provisions of the 2010 health reform law affecting employer coverage.
In particular, the survey estimates that employers added 2.3 million young adults to their parents’ family health insurance policies as a result of the health reform provision that allows young adults up to age 26 without employer coverage on their own to be covered as dependents on their parents’ plan. Young adults historically are more likely to be uninsured than any other age group.
"The law is helping millions of young adults to obtain health coverage. In the past, many of these young adults would have lost coverage when they left home or graduated college," said study lead author Gary Claxton, a Kaiser vice president and co-executive director of the Kaiser Initiative on Health Reform and Private Insurance.
The survey also found that 56 percent of covered workers are in "grandfathered" plans as defined under health reform. Grandfathered plans are exempted from some health reform requirements, including covering preventive benefits with no cost sharing and having an external appeals process. To obtain this status, employers cannot make significant changes to their plans that reduce benefits or increase employee cost.
One in four covered workers (23 percent) are in plans that changed their cost-sharing requirements for preventive services as a result of a requirement of the health reform law that non-grandfathered plans provide certain preventive benefits without cost sharing. In addition, 31 percent of covered workers are in plans that changed the list of preventive services due to health reform.
Find a full implementation timeline with brief descriptions of each initiative of the health care reform, click here.
The National Association of Manufacturers isinvolved in implementation of the new health care law with the goal promoting healthcare reform that reduces out-of-control costs and improves patientsâ€™ access to care. Manufacturers believe it is critical to preserve whatâ€™s working in our health care current system while addressing the inefficiencies and problems that cost manufacturing in the United States billions of dollars a year.
To drive down costs in the long term and extend manufacturers health care coverage, the NAM supports regulatory implementation that includes a focus on preventative care, proper use of health information technology, and alignment of incentives so that successful outcomes are rewarded. We are concerned about benefit mandates in the legislation that limit the flexibility of employers to provide tailored, cost-effective plans to employees. Manufacturers in America advocate increasing access for small businesses and uninsured individuals by reforming the small group and individual insurance market.