During this open enrollment season, many of the larger analyst firms are releasing new data on the costs of healthcare and the trends that are being seen in the industry.
Here are some of the results of the 2007 Towers Perrin survey:
7% increase for all health plans combined for actives:
- Average per employee cost is $8,796
- Actual underlying trend is closer to 9.5%
- Average increase is $575 per employee
Affordability is likely to be a key issue for low-wage workers and pre-65 retirees
- Employers are testing innovative approaches to address this issue
- Significant variation persists between high cost and low cost companies
- Difference of approximately $3,000 per employee per year
- Variation is also evident across industry sector
Employers are finding it difficult to manage the increases they are seeing in healthcare costs, but have shifted costs to employees so much in the past several years that they are finding it difficult to simply raise premium costs. A new study by Mercer Health & Benefits showed that increases in deductibles and co-payments leveled off this year.
However, experts say that as workers' share of healthcare costs increased in recent years, many employees have decided to go without health insurance, particularly those who are generally healthy and dont require a lot of medical care. But that actually often increases the cost for employers because those who remain on the insurance plan are then likely to need medical care and often, substantial and costly care, which leads claims to increase.
"Employers are realizing that if it is unaffordable, it is not a benefit anymore," said Laura Baker, a principal in Mercer's Los Angeles office. Because of this realization, companies are beginning to look at alternatives to controlling costs, including some choosing to no longer offer healthcare at all.
However, those continuing to offer benefit programs are often turning to consumer-directed health plans and disease prevention/wellness programs. But those continuing to offer benefits are increasingly turning their attention to disease prevention programs and consumer-directed health plans with low premiums and high deductibles, Baker said. Those are more attractive to those less likely to need healthcare, she said.
Mercer consultants predict they will grow rapidly because employers are simply running out of options. Those surveyed by Mercer, a unit of Mercer Human Resource Consulting, favored these alternatives over reducing benefits or shifting more costs to employees.
Additional findings of the Mercer study include:
- The percentage of large companies, those with 500 or more employees, that offer preventive health screenings nearly doubled in the last three years.
- Overall, about a quarter of the nearly 3,000 companies surveyed by Mercer offered such screenings, which assess workers' condition and give tips on how to stay healthy.
- Consumer-directed plans, which allow workers to place money in accounts earmarked for healthcare expenses, are offered by 6% of employers, three times the level of last year. An additional 14% said they were likely to offer such plans next year.
- For employees enrolled in health management organization plans, or HMOs, average co-pays remained unchanged at $18 last year, after rising steadily from $14 in 2002.
- Average deductibles for preferred provider organization plans, or PPOs, jumped from $523 in 2002 to $769 in 2005 but saw a more modest increase this year to $846.
- Premiums rose 6.1% this year, to $7,523 per employee, less than a high of 14.7% in 2002 but still way ahead of inflation and wage increases. The numbers are similar to findings in other surveys.
- Employees are typically responsible for 20% to 30% of the premiums, and that number hasn't changed much over the years. But the overall increase in the cost of benefits has eroded worker incomes, and many are choosing to go without.
- Close to 5 million workers have joined the ranks of the uninsured since 2000, either because they couldn't afford their employer-sponsored health plans or because their companies could no longer afford them.