2010 Healthcare Costs Likely To Rise at Higher Rate Than 2009
Jan 5, 2010
The “Kaiser Family Foundation” (KFF) publication titled “2009 Kaiser Employer Health Benefits Survey” can be viewed on-line; I would not recommend that you print it unless you want all 238 pages in hard copy. In doing this survey they completed full interviews with 2,054 firms from January to May 2009.
The KFF survey shows average cost of single coverage as $4,824 (2.6% higher that $4,704 reported 2008) and family coverage as $13,375 (5% higher than 2008).
The average monthly worker contributions of $65 ($779 Annual) for single coverage and $293 ($3515 Annual) for family coverage are statistically unchanged from the $60 and $280 reported in 2008. However, since 1999, average worker contribution has more than doubled for both single and family coverage.
remium contributions by covered workers averaged 17% for single coverage and 27% for family coverage, similar to the percentages reported in 2008 for both single and family coverage. The average monthly worker contributions are $65 for single coverage and $293 for family coverage.
Workers in small firms (3-199 workers) contribute an annual amount of $625 for single coverage, which is significantly less than the $854 contributed by workers in large firms (200 or more workers). In contrast, workers in small firms with family coverage contribute significantly more annually than workers with family coverage in large firms, ($4,204 vs. $3,182).The percentage of workers with deductibles of $1,000 or more for single coverage continues to increase. From 2006 to 2009, the percentage of covered workers with a deductible of $1,000 or more for single coverage has more than doubled, from 10% to 22%. And, workers in small firms (3-199 workers) are more likely to have a general annual deductible of $1,000 or more for single coverage than workers in large firms (200 or more workers) (40% vs. 13%).
overed workers in small firms (3-199 workers) are more likely to work for a firm that pays 100% of the premium than workers in large firms (200 or more workers). In small firms, 39% of covered workers have an employer that pays the full premium for single coverage, compared to 8% of covered workers in large firms (Exhibit 6.16). For family coverage, 14% percent of covered workers in small firms have an employer that pays the full premium for family coverage, compared to 2% of covered workers in large firms.The trend reported in the “Kaiser Employer Health Benefits Survey” shows the percentage of workers with deductibles of $1,000 or more for single coverage continues to increase. From 2006 to 2009, the percentage of covered workers with a deductible of $1,000 or more for single coverage has more than doubled, from 10% to 22%. Workers in small firms (3-199 workers) are more likely to have a general annual deductible of $1,000 or more for single coverage than workers in large firms (200 or more workers) (40% vs. 13%).
In 2006, the Government Accountability Office (GAO) predicted that employers’ will continue restructuring Healthcare offerings putting more emphasis on Consumer-Directed Health Plans (CDHP) and striving to educate employees and encourage them to become more involved in the health care decision-making process. Health Savings Accounts (HSAs) are likely to be more widely adopted in 2010 and beyond. Unfortunately, if Medicare continues to reimburse lower than the market rates, private insurers will continue to be stuck with making up the difference by paying (in effect) higher than market rates. Findings from the 2009 Employee Benefit Report Institute “Consumer Engagement in Health Care Survey” shows that in 2009, 4 percent of the population was enrolled in a CDHP, up from 3 percent in 2008. Enrollment in High-Deductible Health Plans (HDHPs) increased from 11 percent in 2008 to 13 percent in 2009.
We in the HR profession are all keeping our fingers crossed that a recent Towers Perrin Healthcare Cost Survey estimate of a 7% increase in 2010 will hold true. However, average and range are two different measurements. A 7% average may happen, but there is a wide range of increases being projected here in South Central Pennsylvania. I only have anecdotal information at this point, but in a recent round-table discussion with our Association members on this topic we heard of actual increases ranging from 15% to 64% with no company reporting projected increases below 15%. We are currently projecting an average increase of >15% in 2010 for area companies in South Central PA.
One of the biggest issues for businesses under Senate and House health care proposals is an employer mandate, also known as the "pay-or-play" mandate. This mandate would require businesses to offer "meaningful" health care benefits to their employees or pay a penalty that would contribute to a public fund to cover the uninsured. Both President Obama’s campaign proposal and Senate Finance Committee Chair Max Baucus’ white paper included an employer pay-or-play provision.
A pay-or-play requirement is put into place to reduce the likelihood that an employer will stop offering coverage because it imposes a penalty on firms that do not offer, providing a disincentive to firms that might otherwise decide to stop offering coverage. Some proposals include a fee defined as a percentage-of-payroll (e.g., 8%) which is used to pay for premium assistance for the otherwise uninsured.
In 2004 the US Chamber Annual Survey of Employee Benefit Costs showed Medically-related employee benefit costs at 11.9 percent of payroll. We did a survey in October (although very limited) on the percent-of-payroll that healthcare premiums represent. Premiums were reported as averaging 14% of payroll. In My concern is if the government mandates healthcare coverage and offers a public option which penalizes employers at an 8% rate there will be a rush by employers to stop offering health insurance and pay an 8% tax rather than incur an ongoing 14%-of-payroll expense (or more). Between 1999 and 2008, the cumulative growth in health insurance premiums was 119%, compared with cumulative inflation of 29% and cumulative wage growth of 34% There are fewer and fewer employers that can withstand these kinds of inflationary increases.
Based on feedback from our member companies here in South Central PA, workforce health/wellness management will gain considerable momentum in 2010; but, my greatest fear at this point is the recent implementation of GINA and the restrictions placed on employers by the “Interim Rule” that was effective December 7th will have a chilling effect and slow wellness initiatives considerably until employers can figure out what is allowable under these new rules.
Lastly, COBRA participants will continue to drive the insurance rates even higher in 2010 and beyond. Individuals who elect COBRA typically anticipate a need for their health benefits and the 2009 Spencer’s Benefits Reports show that COBRA participants actually cost the employer as much as 154% more than the average plan participant due to adverse selection.
I do believe that we need to help individuals in these worst of times, but we also must limit the financial impact of COBRA participants on extremely hard-pressed employers and employer-sponsored health plans. COBRA has been an expensive process for employers. The 2009 Spencer’s Benefits Report shows, on average 10% of qualified beneficiaries elected COBRA in 2008, and their average COBRA claims costs were 54% higher than active employees due to this adverse selection. Further, average COBRA administrative costs, including notices and billing/remitting premiums (but excluding ASO fees for claims administration) were approximately $338 per COBRA participant/year.
The bottom line for employers is that healthcare coverage costs appear that they may continue to rise at double digit rates.
Jim is employed as Sr Consultant Talent Management at the Manufacturers’ Association of South Central Pennsylvania and is certified as Senior Professional Human Resources (SPHR) and is a member of the Society for Human Resource Management. He is past president of our MASCPA affiliated Employee Relations Council; past president of Hanover Area Management Association; past president of Hanover Area Human Resource Association; Past president of York Personnel Association, and past chair of Baltimore Industry (OFCCP) Liaison Group. A graduate of York College of Pennsylvania with a Bachelor of Science degree in Accounting, Jim earned his Masters of Administrative Science from Johns Hopkins University.
Jim can be reached by emailing