For the third straight year, increases in health-insurance premiums for employers stayed below 4 percent. Southern employers contributed the least to their workers’ health plans, an annual report says.
By Rose Hoban
For the third straight year, increases to employers for their workers’ health insurance stayed below 4 percent, at 3.8 percent nationally, according to an annual report by a large employment consultant firm.
The 2015 Mercer National Survey of Employer-Sponsored Health Plans found that, on average, total health benefits cost $11,635 per employee — including employee contributions — with states in the Southern region reporting the lowest average cost of $11,209.
The survey also found that among firms with between 10 and 499 employees, costs grew slightly faster, at 5.9 percent, while larger companies saw growth slow to 2.9 percent. Mercer does not survey employers with fewer than 10 employees.
And the biggest change for employees was that more of them were being offered so-called “consumer-driven” health plans with high deductibles, combined with some variety of health savings accounts. Last year, nationwide, the number of people in high-deductible plans reached 25 percent, a move that holds down costs for employers, while shifting more costs to workers. However, in smaller firms with fewer than 500 employees, the rate of people on high-deductible plans has grown more slowly.
Mercer surveyed 2,486 firms around the country, with 32 percent of the responses coming from Southern companies.
First the good news
In small firms, fewer bosses are considering eliminating coverage for their workers.
“In 2013, 21 percent of employers with 50 to 499 employees said they were likely to drop their plans within the next five years; this number fell to 15 percent in 2014 and to just 7 percent in 2015,” the authors concluded.
The report speculates that this trend is a reflection of slowing rates of growth in the cost of insuring workers.
And employers are not moving their workers into the Affordable Care Act marketplace. When the ACA became law in 2010, many pundits predicted that employers would give their workers money to sign up for ACA marketplace plans. However, when employers give workers money to cover their premiums, the extra pay gets taxed. And subsidies offered by the federal government roughly matched what workers would need to receive from their bosses to cover the costs of the plans.
So there were fewer savings for employers than anticipated. Add to that an improved economy, which gives workers more bargaining power, many employers have simply chosen to continue covering their workers.
The use of private benefit exchanges is picking up pace. These are online marketplaces that mirror the way plans are offered on Healthcare.gov. But these exchanges are created by employers and only contain plans the employers want to offer. These private marketplaces give workers the opportunity to compare and choose the plan that’s best for them.
The use of those exchanges has grown from 3 percent of employers in 2014 to 6 percent last year.
Now the not-so-good news
Since 2007, companies in the South have paid less for insurance, per employee, than in any other part of the country. At the same time, Southern workers pay a larger share of their total insurance premium cost than workers in the rest of the U.S, picking up about 25 percent of the cost of the insurance plan. That’s true whether they’re in high-deductible plans or Preferred Provider Organization plans.
That trend also holds true for employees paying for family plans. The out-of-pocket percentage paid by Southern workers is significantly higher than in other parts of the country for high-deductible plans, health maintenance organizations (HMOs) and preferred provider organizations (PPOs.)
Over the past five years, traditional PPOs, which give workers lower costs in exchange for tighter networks of doctors and hospitals, have been on the decline. However, 90 percent of Southern employers are still offering those plans, a larger percentage than in the rest of the country. More workers in the South (64 percent) have signed up for PPOs than in the rest of the country.
In Western states, by contrast, 80 percent of employers offer PPOs, but only 44 percent of workers have enrolled in them. Western companies have stuck with HMOs such as Kaiser Permanente at a higher rate, while Southern companies have moved away from HMOs to PPOs and high-deductible plans.
High-deductible plans often have lower monthly premiums for workers up front, and if they and their families stay well for the year, they don’t pay much. But those high deductibles can become a burden if a worker or a family member has significant health care costs. Those can result from anything from paying most of the costs for a sprained ankle to owing more out of pocket when a child has repeated ear infections.
“Cost-sharing,” the amount that employees pay out of pocket, has risen steadily during the last decade. According to a different study, performed earlier this year by the Kaiser Family Foundation and Truven, another employer consultant, the average amounts enrollees spent on their deductibles rose from $99 in 2004 to $353 in 2014.
So, for most employees, copays are no longer a big-ticket item. Instead, they’re opening their wallets to meet deductibles that have steadily ticked upwards.
More out-of-pocket costs, restrained choices
Even as insurance premiums grew slowly in 2015, the costs of pharmaceuticals have grown dramatically, with increased costs driven by high-cost specialty drugs. That’s leading employers to do more to control these costs. More employers are using techniques such as step therapy to compel patients to try cheaper drugs before getting access to more expensive ones.
Another technique to control drug costs is to have medications covered by separate drug plans that have “tiered” pricing to give employees an incentive to use cheaper drugs through lower co-pays.
“The majority of employers continue to offer prescription drugs through the medical plan, though the larger the employer, the more likely it is to have carved out the prescription drug benefit to a pharmacy benefit manager,” the authors noted.
Under the ACA, all out-of-pocket costs — for insurance, copays, deductibles and prescription drugs — are subject to an annual maximum of $6,850 for an individual and $13,700 for a family. The report also found that more than a quarter of employers (29 percent) have separate out-of-pocket maximums for prescription drugs.
As companies look to shed their long-term obligations, fewer employers offer retiree health care. Southern firms have embraced this trend more strongly than in the rest of the country.
Companies used to offer new hires the opportunity to become vested in plans that covered the health-care costs if they retired before they were eligible for Medicare at 65. But now, only 16 percent of employers allow new workers into these types of plans. Also, fewer companies are offering to pick up the extra expenses for their former workers who are on Medicare, leaving retirees to foot the bill.
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