Mercer’s latest National Survey of Employer Sponsored Health Plans reports that the cost of employer-based benefits will jump significantly in 2015
Employers in the U.S. are predicting that health benefit cost per employee will rise by 3.9 percent on average in 2015, preliminary results from a new survey by Mercer reveal. Cost growth slowed to 2.1 percent in 2013, a 15-year low, but appears to be edging back up. Moreover, a higher percentage of employees signing up for coverage through the worksite could be a wildcard driving costs higher.
The projected increase for 2015 reflects actions employers plan to take to manage cost. If they make no changes to their plans for 2015, they predict that costs will rise by 5.9 percent on average. However, only 32 percent of respondents are simply renewing their existing plans without making changes.
One important change that employers are making is moving towards consumer-driven health plans (CDHPs), coupled with Health Savings Accounts or Health Reimbursement Arrangements. Currently, 6 percent of large employers offer only CDHPs. Within three years, 20 percent of employers anticipate that they will have fully replaced their traditional health insurance with CDHPs.
Some believe that Obamacare is driving this switch. To be sure, we should be grateful that CDHPs are surviving Obamacare, but they have been increasing market share for years. The real effect of Obamacare is shown in Figure 1: It is eliminating pay raises. Recall that we entered the Great Recession in December 2007, but even then we got pay raises (according to Figure 1). That is ending. All of our increased compensation will be in the form of health benefits, which will not be better, but merely Obamacare-compliant. Isn’t it time American workers took home more of their compensation as wages, instead of paying it to health insurers?
Mercer also reports that employers plan to expand the number of workers they cover, due to Obamacare’s employer mandate, which kicks in in 2015. Responding employers kind of wriggled around the question of whether they would cut back hours, stating that they would “manage schedules more carefully.” Fair enough, but this blog has previously discussed evidence that Obamacare has already hurt workers’ hours. It is not clear how covering a larger share of workers from a smaller pool of employed people is an improvement from that which existed before Obamacare.
Do we have any figures on present median HSA balances and deductibles?
It is my understanding that as a general rule, the employer is funding the HSA each year to about half the deductible.
It is abominable that most of the pay raises are going to health insurance.
Insurers need to design ways to reduce premiums. One way is by having the employees and dependents pre-funding ever increasing deductibles.
Don Levit
Obamacare will devour your pay raise.”
I prefer to think of Obamacare AS my pay raise.
And you are free do to so. However, should not every person be free to decide where they want to spend their raise?
Of course they should. I was being a bit sarcastic. I was not always so cynical.
Despite the introduction of hsa-qualifying. High deductible health plans in ever greater numbers, employee contributions, particularly for family coverage have increased.
More importantly, in the past 20 or so years, employer spend on medical went from 6 to 8 percent of total rewards according to the bus, while direct comp went from 72 to 69 percent.
The mix has changed. At the San rate, by 2025, health will exceed 10 percent and direct pay, wages, will be less than two thirds of rewards … Despite higher deductibles.
As herb stein once famously said, if a trend cannot go on, it will stop. So will the ever increasing spend on employer sponsored medical
Jack
Jack:
The problem is that the ever-increasing deductibles are not pre-funded up to their balances.
Health Matching Insurance will help pre-fund those deductibles with a 35 percent returned on contributions – guaranteed.
The most effective way of reducing poremiums is by raising deductibles and pre-funding them – fully.
Until we get a handle on premiums, the cost of the care is irrelevant.
If you cannot afford the insurance, how can you worry what the cost of the services are?
We have been approved by the Texas Dept. of Insurance as a licensed insurer.
Don Levit
Managing Partner National Prosperity Life and Health
Most effective at what? What goal are you attempting to achieve?
The most effective way to reduce employer paid premiums are to retarget your level of coverage so that it is less valuable than what most workers can get if they are married, and have access to a spouse’s employer’s plan, Medicaid, a prior employer’s plan, Medicare, etc. Then, to minimize enrollment, you would pay higher direct compensation and not make contributions to a HSA, nor fund a HRA.
That will lower the cost of the option offered, and, lower the participation in the plan – if, that is, the employer’s goal is to reduce premiums.
Certainly, employees are concerned about the cost of coverage, as are employers. But, diverting more and more of the total rewards budget to fund ever increasing health care costs is not a solution.