How merry are your benefits?

As an employer, you know the New Year is approaching fast; and if you have not already had your open enrollment completed, or if you are sweating the last minute details of your plan design and rollout for 2012, you may be wondering what to expect for the final version of your benefits.

Well, if you think insurance coverage and health care costs are expected to drop like the ball in Times Square, think again. With the Affordable Care Act, costs are going to increase over time — a lot.

According to Industry Market Trends, the cost of employee health insurance coverage is expected to rise again next year, albeit at the slowest pace in more than a decade, as employers experiment with a range of cost-saving strategies. Employee health care costs have been on a steady upward trend for years, accounting for increasingly larger portions of overall business expenses.

New reports indicate that health insurance costs have risen sharply this year and are expected to continue climbing next year. In an effort to curb mounting health care expenses, many businesses are adopting lower cost options and shifting more of the burden onto workers.

Early responses, according to Mercer, show that health benefits costs will rise an average of 5.4 percent in 2012, the smallest increase since 1997. However, the rate of growth will still exceed the general inflation rate and increases in workers' earnings. The recent slowdown in the growth rate to a 15-year low reflects widespread cost-cutting efforts implemented by employers, including moving employees to less expensive benefit plans, raising deductibles and increasing worker paycheck contributions.

Without these changes to health care plans, employers estimate that costs would increase 7.1 percent, more than twice the rate of general inflation and a figure that many businesses are not willing or able to absorb. Over the past five years, health benefit increases have risen annually an average of 9 percent.

Employers seem to be turning to cost-shifting as an alternative to dropping coverage outright. During the first half of the decade, the share of companies offering health insurance shrank from 68 percent to 60 percent, and the figure for very small firms dropped from 58 percent to 48 percent. But since about 2005 that decline has leveled off, according to the Washington Post.

Premiums paid directly by workers have galloped ahead of wage increases and inflation — rising 131 percent between 2001 and 2011 for family plans. Employer costs for those plans have gone up 113 percent over the same period, as some have asked their workers to take on a higher proportion of premium costs.

To cope with future cost increases, 33 percent of employers plan to raise contributions for employee-only coverage, 36 percent plan to raise contributions for dependent coverage, 33 percent plan to increase deductibles, co-pays and out-of-pocket maximums, 7 percent plan to increase cost-sharing some other way and 39 percent are not planning to ask employees to pay a greater share of the cost, according to Mercer's findings.

Employers have also been pushing consumer-directed health plans, or CDHPs, which are high-deductible plans with a tax-advantaged spending account like a health saving account attached to it, according to CNN Money. They are also a lot less expensive than other plans.

According to Mercer, CDHPs are roughly 15 percent cheaper than traditional health care insurance plans, and their use has risen sharply in recent years. In 2012, CDHP offerings are expected to reach 18 percent among small businesses and 58 percent among larger businesses. In 2011, annual premiums for employer-sponsored family health coverage have climbed to $15,073, up 9 percent from last year, according to the Kaiser Family Foundation and the Health Research and Educational Trust. Workers pay an average of $4,129 of the total, while employers pay $10,944. Meanwhile, premiums for worker-only coverage rose to $5,429, an 8 percent increase from 2010.

The steep increase in rates is particularly unwelcome at a time when the economy is still sputtering and unemployment continues to hover at about 9 percent. Many businesses cite the high cost of coverage as a factor in their decision not to hire, and health insurance has become increasingly unaffordable for more Americans, according to the New York Times.

As the holidays approach, employers who are caught in the pinch between rising costs and cost shifting must make hard choices. Employees may not like what happens, but some insurance is better than none. Companies have some tough days ahead, not only from an economy that is still behaving more like a giant three toed tree sloth than a roaring lion, but also what to do in light of new PPACA trigger points coming up soon.

Regardless of what happens next summer with a ruling from the Supreme Court on the Affordable Care Act, the juggernaut of health care is moving faster and faster. Do your best to keep up.

About the Author
Mark Roberts

Mark Roberts

Mark Roberts’ professional sales background includes 30 years of sales and marketing in the tax, insurance, and investment markets. Mark is a licensed life, health and accident insurance agent in all 50 states and D.C., for insurance products, and discount health plans. He serves as Manager of National Accounts at Careington International ( www.careington.com ). Additionally, Mark has been writing a health care blog for the past three years, found at www.yourbesthealthcare.blogspot.com , which is a topical weblog about various health care issues. He also regularly contributes articles to magazines for both medical and dental topics both in the U.S. and the UK. You can reach Mark at markr@careington.com.

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