One of the benefits full-time employees take as a given is health insurance. But, as premiums continue to rise disproportionate to other costs, companies increasingly have difficulty covering the expense.
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Two new surveys provide insight into business trends that have the potential to impact recruiting.
Practices at Large Companies
The Large Employers’ 2018 Health Care Strategy and Plan Design Survey, conducted between May and June 2017 by the National Business Group on Health (NBGH), a non-profit organization representing large employers’ perspective on national health policy issues, includes responses from 148 large employers. Collectively, respondents represent a wide range of industry sectors and offer coverage to more than 15 million employees and their dependents. Two-thirds of respondents belong to the Fortune 500 and/or the Global Fortune 500, and 42 belong to the Fortune 100.
Employers responding to the survey project the total cost of providing medical and pharmacy benefits to rise 5 percent in 2018; this marks the fifth consecutive year with a 5 percent increase.
Including premiums and out-of-pocket costs for employees and dependents, the total cost of health care is estimated to be $13,482 per employee this year, and projected to rise to an average of $14,156 in 2018. Employers will cover nearly 70 percent of the cost while employees will bear approximately 30 percent of the cost, or nearly $4,400 in 2018.
For the second consecutive year, specialty pharmacy is ranked as the top driver of cost, with eight in 10 employers ranking it among the top three cost drivers. Specialty pharmacy costs are likely to remain a top concern as new high-priced drugs come on the market.
In an effort to address costs, a growing number of large U.S. employers plan to focus more on how health care is delivered and paid for while still pursuing traditional methods of controlling costs such as cost sharing and plan design changes, the survey finds.
“Employers are recognizing that traditional cost control techniques alone aren’t able to reduce costs to the point where they are no longer a drain on the bottom line,” said Brian Marcotte, president and CEO of the National Business Group on Health. “While employers continue to address costs through health care management and plan design efforts, they are also ramping up efforts to positively affect the supply side of the health care system by pursuing health care payment and delivery reform initiatives.”
According to the survey, an increasing number of employers plan to adopt various strategies. These include telehealth; onsite or near site health centers; and value-based benefit design in which employees receive reduced cost sharing or premium reductions when they take steps to manage chronic conditions or obtain higher-quality or more efficient care, among other strategies.
Practices at Small Companies
Midsize companies tend to follow large company practices when it comes to health insurance benefits, even as they sometimes require employees to contribute more toward coverage.
By contrast, small employers, those with less than 100 employees, have a reputation for not offering health insurance benefits that are competitive with large employers. However, a new survey from United Benefit Advisors (UBA), a leading independent employee benefits advisory organization, finds small companies are keeping pace with the average employer and are doing a better job of containing costs.
The UBA Health Plan Survey finds employees across all plan types pay an average of $3,378 toward annual health insurance benefits, with their employer picking up the rest of the total cost of $9,727. Among small groups, employees pay $3,557, with their employer picking up the balance of $9,474—only a 5.3 percent difference.
When it comes to average annual cost per employee, UBA data shows that small businesses actually cut a better deal, and even when compared to their largest counterparts their costs are generally below average. For example, the average annual cost per employee (all plans) is $9,727, but for small groups with 25 to 49 employees, the average cost per employee is only $9,165.
“While employers with 500 to 1,000 or more employees may indeed offer better coverage (lower copays, deductibles, in-network out-of-pocket maximums, and monthly premiums), small employers have a lot to offer employees when it comes to wages, purpose, flexibility, etc.,” says Peter Weber, president of UBA. “Small employers would do well to benchmark their plans against their same-size peers and communicate how competitive their plans are relative to average national costs, deductibles, copays, and more.”