With the labor market transitioning to accommodate for theinflux of millennial workers, the health benefits market is alsocoming to terms with these changes.

Combined with broad changes to health benefits in recent yearsafter the adoption of the Affordable Care Act (ACA), many employershave re-assessed their coverage plans. While many employees haveopted into traditional coverage plans, many now look tohealth savings accounts (HSAs) as asolution.

So what is the current state of the health benefits market?ADP’s Annual Health Benefits Report provides uswith insight.

The market is stable

Overall, the data in this year’s report suggests thatemployer-provided health care plans in the large employer marketare stable. Seventy-six percent of those eligible chose to purchasebenefits in 2016, and employers are effectively adjusting tochanges mandated by the ACA.

Eligibility rates continue to rise, a 2.3 percent total increasefrom 2014 to 2016. Yet, changes in costs have been modest, andshifting demographics in the workforce are keeping the overallgrowth in cost per employee lower than in the past.

While most large employers have offered health benefits to theiremployees for years, and use some form of self-funding, manysmaller employers see variations in premiums due to fewer options.Price stability may be the norm for larger employers, but smallercompanies tend to fluctuate a bit more.

Premiums have risen, but are steadier than pre-2014

Now two years into the ACA era, it’s interesting to see howpremiums have stabilized. Average monthly premiums rose 5 percent between 2014and 2016, slow growth compared to the double-digit growth inprevious decades.

The average employer contribution in 2016 was $672, or a 76percent share of the coverage cost. On average, an employee pays 5percent of his or her income in premiums, but those at the lowerend of the pay scale contribute a higher percentage of income intotheir benefits. Premiums comprise 8.1 percent of income for thosemaking under $20,000 per year, compared to 2.4 percent for thosemaking over $120,000 per year.

Younger workers are staying on their parents’ plans

Participation levels are the lowest for workers under 26,decreasing 1.7 percent from 2014. This group had the highestincrease in eligibility since 2014 (3.9 percent), but had thelowest participation rate by a wide margin (44 percent compared to71 percent of those aged 26 to 34).

Younger employees who are able to stay on their parents’ healthplan avoid separate health deductions, helping offset otherfinancial burdens they may face as they enter the workforce. Forlarger employers who typically self-fund, the cost of adding ahealthy young person to the risk pool is marginal. Across theboard, it makes a great deal of economic sense.

More broadly, the demographic shifts in the workforce are havingan effect on the health benefits market. While the average age ofthe total sample hasn’t changed that much, we are seeing that theage of the workforce is widening.

Many baby boomers are remaining in the workforce longer thanexpected. Combined with the growing number of millennials enteringthe workforce, employers are looking for ways to solve the issuesthat arise from these age distributions, whether it is determininghow to communicate about benefits (email or paper) or designingbenefits packages that suit a broad range of ages.

We know that the large employer segment of group health benefitshas been an island of stability in the market. But even the largeemployer market segment is subject to emerging trends in healthcarethat may drive premiums higher. Two recent surveys by the National Business Group on Health and Willis Towers Watson point to similar moderatehealth cost increases but note that this growth outpaces increasesin economic indicators. They conclude that while these increasesare also below historical averages, they outpace cost of livingincreases.

The market is stable now, but we must take note of how itcompares to the broader economic situation. Taken with thedemographic changes, it will be interesting to see how HSA planschange the way that younger employers purchase later in their livesand how this will set the tone for future employees.