For many employees, employer-sponsored health insurance is an invaluable safety net against medical expenses – but for many companies, the cost of that protection is still climbing.
Since 1999, worker-only health insurance premiums have jumped 147 percent, to $5,429 a year in 2011, up from $2,196 annually 12 years ago, according to data from the joint Kaiser Family Foundation/Health Research & Educational Trust Employer Health Benefits Survey, conducted each year.
The Rising Cost of a Safety Net
Since 1999, average annual health insurance premiums have increased 147 percent. Employers are shifting more of the cost burden to staff, with employee-paid premiums up 2.5 percent in that time.
The 2011 survey, released in September, was conducted during the first five months of the year and included responses from more than 3,100 public and private companies with at least three employees apiece.
The latest survey data shows that worker-only premiums increased 8 percent this year.
Chad Munsey, a registered health underwriter and group health insurance producer at Springfield-based Nixon & Lindstrom Insurance, said health insurance renewal rates have been “all over the board” for his clients, which are primarily small businesses with fewer than 50 employees. He cited an example of one company that saw a 19 percent drop in premiums, and another, on the other end of the spectrum, that had a 7.8 percent increase.
Insurance companies are still grappling with reform, Munsey said, pointing to the medical loss ratio rule in particular.
“Simply stated, (they) can’t make too much money on accounts, and they definitely don’t want to have to rebate any premiums back to employer groups if they don’t have to,” Munsey said.
Under the MLR rule, depending on size, insurance companies’ profits are limited to 15 percent or 20 percent of premiums, Munsey said.
“What it’s intended to do is restrict companies from having a windfall, and I think it’s well-intentioned, but it’s not very well thought out,” Munsey said, nothing some companies have pulled out of the market, reducing competition.
“Think about it. If competition’s reduced, and you’re guaranteed a 15 (percent) or 20 percent profit … would you rather make 20 percent on $100 or $200? Costs will eventually rise.”
Overall, Munsey said more companies see rate hikes, not decreases, though he noted that in many cases, the increases are less steep than in years past. He noted, too, that compared to previous years, he’s seeing quite a few more rate reductions, though increases are still more common.
The most common type of plan included in the national worker premium average is preferred provider organizations, used by 55 percent of the covered workers whose companies participated in the survey.
Some Missouri companies are working with a Springfield-based advocacy group to keep their PPOs more affordable. For the past six years, the Missouri Association of Manufacturers has offered its members access to health insurance through consortiums, said Executive Director Rita Needham. The consortiums encompass 62 companies and 2,700 insured individuals, who are employees or dependents, and provide access to group-rate pricing.
The consortiums have rate caps, Needham said, which gives participating companies an idea of what to expect at renewal time.
The 39 companies in the original consortium, for example, have a single-digit rate cap, so any increases will be less than 10 percent. The second consortium’s rate cap isn’t limited to single-digit increases. Needham noted, though, that the second consortium’s renewal rate did increase, but it stayed under the cap. She declined to disclose the amount of the cap.
In the Kaiser survey, annual PPO premiums averaged $5,584 in 2011. Though Needham declined to disclose specific amounts, she said renewal rates for the consortiums’ PPOs were 27 percent to 46 percent less when compared to the national average.
Needham said the MAM consortiums only accept new members during open enrollment, which falls during the summer. She said it would be June or July before companies could apply for admission to the consortiums for coverage to start in January 2013.
Consortium members commit to staying in the groups for at least three years, with renewals every year.
Needham noted, however, that to be eligible, companies must be MAM members for at least six months.
“They can’t just join at the time we’re adding someone and go right in,” Needham said, noting that MAM doesn’t use a cookie-cutter approach to its group plans. “We put a group together and then the rates are set and the plans are designed for that group according to what (it) wants. Then, they are rated based on claims experience and the demographics of the group.”
Even companies enrolled in traditional group plans are looking for ways to save money as premiums rise, Munsey said. He’s worked with a few companies that have dropped health coverage altogether amid premium hikes, but he said most companies will look at reducing benefits to cut costs and keep some sort of coverage in place.
“They’ll have a $1,000 deductible and go to a $2,500 deductible,” he said. “In some cases, they’ll make a prescription drug card change or a combination of those.”
In the 2011 Kaiser survey, employers paid 83 percent of employee premiums, down slightly from 85.5 percent of premiums paid in 1999.
Munsey said he has seen some companies passing more premium costs on to employees.
“It’s a tough pill to swallow for employees, but believe me, employers sit there and struggle with it too. But in order to maintain a decent benefit that’s not going to bankrupt somebody, sometimes they’ve got to kick that cost over to the employees,” he said, noting that some employers have asked Nixon & Lindstrom to create benefit reports that show employees not only their salary data, but also the dollar amounts spent on benefits, to help illustrate how benefits affect the bottom line.[[In-content Ad]]
