Health care insurance premium increase

By: Kathryn Mayer (Benefits Pro) August 2015

Proponents of the Patient Protection and Affordable Care Act can say the law is controlling health insurance costs all they want. But it seems employers do not agree.

Nearly all employers — nine in 10 — say they’re facing increases in the premiums they pay for employee health plans, with nearly 25 percent of employers seeing rate increases in the double digits, according to new research out Thursday by Arthur J. Gallagher & Co.

Though other reports have similarly found increasing costs, the new survey by the brokerage powerhouse is substantial, with analysis from more than 3,000 U.S. employers. The firm’s annual “Benefits Strategy & Benchmarking Survey” surveyed employers from dozens of industries across the country.

“By far, the top benefits concern among employers is the continued rise in the cost of providing group medical coverage for employees,” said James Durkin, president of Gallagher Benefit Services, Inc. “Employers are examining all available options to rein in medical costs, while still offering competitive benefits packages that help them attract and retain the best employees in a tightening labor market. With the Cadillac tax due to take effect in 2018, employers are expected to increasingly turn to newer, alternative cost-control tactics.”

Not surprisingly, employers are increasingly requiring employees to shoulder a larger share of the expense in the form of higher deductibles to rein in spending, with Gallagher reporting 67 percent are cost-shifting to employees. Gallagher said in-network family plan deductibles average $3,000, while out-of-network deductibles average $4,500. Annual deductibles for employee-only in-network plans now average $1,200, and out-of-network coverage deductibles are an average of $2,000. Meanwhile, about half of employers say they are considering changing carriers to condense costs.

Those moves, Durkin says, put employers in the tough position of having to find balance between two competing concerns: attracting and retaining talent that help build their business while decreasing operating costs, including controlling health care expenses.

“Both [cost-shifting and changing carriers] approaches are likely to make it more difficult to attract and retain strong talent,” the report said.

Despite the increasing cost pressures, nearly all organizations (97 percent) said they plan to continue providing employer-sponsored coverage to employees.

Though adoption is relatively low on other cost-saving methods — including offering health savings accounts to employees (36 percent); implementing mandatory generic drug policies (15 percent), and offering reduced network access or narrow provider networks (11 percent), Gallagher says those tactics may gain momentum in the next few years. For example, 35 percent of employers said they may change the funding arrangement, likely to self-funding, while another 13 percent said they might offer narrow provider networks in the next three years.

Benefits Pro