- change ups
Employee health care cost increase may have slowed in 2013
However, expert says new taxes and fees in ACA will add to cost increases in 2014.
According to the findings of McGraw Wentworth’s 2013 Southeast Michigan Mid-Market Group Benefits Survey released May 20, midsize employers are making moderate health plan changes, keeping cost increases to 4 percent — the lowest rate in 10 years. They also are increasing their use of outcomes-based wellness plans, and 91 percent of them plan to continue offering health insurance under health care reform.
The 10th annual survey by McGraw Wentworth, which is based in Troy and said to be the largest benefits consulting/brokerage firm in Michigan, benchmarks health benefits and cost trends for 2013. The survey includes information about key decisions made pertaining to health reform at 440 Southeast Michigan-based organizations with from 100 to 10,000 employees.
“In line with national trends, Michigan employer health care costs are rising at an average of 4 percent after plan changes, down from 6 percent in 2012,” said Rebecca McLaughlan, managing director of McGraw Wentworth. “Employers are using strategies such as wellness, consumer driven health plans, spousal and tobacco use surcharges, and prescription cost management to control their costs. Talent management is top of mind for employers, with 91 percent of the survey participants indicating they plan to continue offering health benefits to full-time employees under health reform.”
Roger Edgren, account director for McGraw Wentworth in the West Michigan region, said the survey results are actually “pretty consistent” with employers’ health care cost decisions across Michigan and, in fact, across the nation. However, he cautioned there is “a risk in people looking at these survey results and hoping that next year” brings further reduction in the annual insurance cost increase.
“I think it will be a huge challenge for employers to maintain these kinds of results in 2014 because of the actual increases in taxes and fees associated with health care reform, with most of them hitting in 2014,” said Edgren.
A Priority Health executive said in early May the ACA adds five new taxes and fees. One is a $63 annual fee for each person covered by an employer’s group health insurance.
Other findings in the 2013 survey by McGraw Wentworth include:
- Michigan employer health care costs are rising at an average of 4 percent after plan changes, down from 6 percent in 2012 and on par with a national trend of 4.1 percent. This is also the lowest increase recorded by the survey since its introduction in 2004. For the second consecutive year, 25 percent of participants report no cost increase at all.
- More southeast Michigan employers are using spousal eligibility limitations to help keep costs down. Almost 60 percent of employees elect dependent coverage for spouse and/or children. But compared to 12 percent of employers nationally, 30 percent of Michigan employers require a surcharge or exclude spouses who are eligible for coverage from other sources.
Edgren said Michigan employers had lagged behind others in national trends, and so were less aggressive in tightening their employee benefits plans as the economy began declining several years ago. However, over the past two years, Michigan employers have “made more difficult decisions” because of the economic challenges in the state.
- Wellness plans continue to evolve with 36 percent of employers offering incentives to employees to achieve a health goal, known as “outcomes-based” wellness plans. Additionally, 60 percent of employers indicated they are planning to move in this direction in 12 to 24 months.
When employers offer wellness plans, an increasing number — 45 percent, up from 41 percent in 2012 — are including both employees and spouses, and in many cases children.
- Tobacco use remains a target for cost management, with 11 percent of southeast Michigan employers charge a tobacco-use surcharge at an average of $46 per month.
The survey cites 96 top-performing organizations, both union and non-union, which McGraw Wentworth has designated “TrendBenders” because they have kept their two-year average benefit cost increases at or below zero. TrendBender organizations are keeping costs flat using more aggressive plans — higher emergency room co-pays, tiered prescription cost sharing, CDHPs as the only plan option — and proactive wellness tactics such as biometric screening.
Regarding the Affordable Care Act, the survey indicates:
- 91 percent of Michigan employers plan to offer health care coverage to full-time employees in 2014 and 2015, rather than pay the penalties entailed by dropping insurance coverage. This is an increase from 85 percent in 2012.
- 41 percent of survey participants do not currently offer coverage to employees working 30 hours or more per week. In 2014, 57 percent of these organizations intend to extend coverage to all qualified employees while 34 percent plan to reduce work hours.
- The primary reason given for continuing to offer employer-sponsored insurance is retention and recruiting. Discontinuing benefits would also be contrary to most employers’ corporate culture, according to McGraw Wentworth.
“As employers examine both the talent management and cost impact of discontinuing benefits, many are finding other strategies and tactics for managing health care cost trend. This survey provides HR and financial professionals with objective, local market insight to help them evaluate their options for 2014,” said Katy O’Brien, account director with McGraw Wentworth and survey leader.
The McGraw Wentworth Mid-Market Group Benefits Survey is the largest of its kind with 537 mid-sized employers participating, including 440 southeast Michigan organizations. Results for municipalities and school districts are analyzed separately, and 81 percent of respondents are returning year-over-year participants. Respondents represent diverse industries with 26 percent self-identified as auto suppliers and 30 percent with union employees.
The survey has a 4 percent margin of error.
McGraw Wentworth, a Marsh & McLennan Agency LLC company, was founded in Troy in 1997, and opened an office in Grand Rapids in 2007. Ryan Bowers of McGraw Wentworth said the firm has about 180 client companies, most of them based in Michigan.