In 2012, large U.S. companies and their employees saw the lowest health care premium rate increases in six years, according to an analysis by Aon Hewitt, the global human resources firm.
The average health care premium rate increase for large employers in 2012 was 4.9 percent, down from 8.5 percent in 2011 and 6.2 percent in 2010. In 2013, however, average health care premium increases are projected to jump up to 6.3 percent.
Aon Hewitt’s analysis showed the average health care cost per employee was $10,522 in 2012, up from $10,034 in 2011. The portion of the total health care premium that employees were asked to contribute toward this premium cost was $2,204 in 2012, compared to $2,090 in 2011. Meanwhile, average employee out-of-pocket costs, such as copayments, coinsurance and deductibles, were $2,200 in 2012, compared to $2,072 in 2011.
For 2013, average health care costs per employee are projected to jump to $11,188. Consistent with the previous two years, employees will be asked to contribute 21 percent of the total health care premium, which equates to $2,385 for 2013. Average employee out-of-pocket costs are expected to increase to $2,429. These projections mean that over the last five years, employees’ share of health care costs—including employee contributions and out-of-pocket costs—will have increased more than 50 percent from $3,199 in 2008 to $4,814 in 2013.
“In 2010, employers found themselves in a challenging budgetary position, thus taking more aggressive actions with their benefit plans. An expected decline in employment levels and new costs resulting from health care reform had to be factored into expected costs, which led many employers and insurers to conservatively project their health care premiums for 2011,” said Tim Nimmer, chief health care actuary at Aon Hewitt.
“As actual results materialized, employers have seen some stabilization in employment levels, less severe impact of high cost claims, a general movement towards consumer-driven plans and greater clarity around the average cost impact associated with health care reform. As a result, 2012 premiums were offset to reflect the better than expected historical experience. For 2013, we expect premium increases to gravitate back to the 6 percent range.”
Costs by Plan Type
On average, Aon Hewitt forecasts that companies will see 2013 cost increases of 7.0 percent for health maintenance organization plans (HMOs), 6.1 percent for preferred provider organizations (PPOs) and 6.1 percent for point-of-service (POS). That means from 2012 to 2013, the average cost per person for major companies is estimated to increase from $10,659 to $11,405 for HMOs, $10,433 to $11,069 for PPOs and $11,062 to $11,737 for POS plans.
Major Metropolitan Area
In 2012, major U.S. markets that experienced rate increases higher than the national average included San Antonio (7.4 percent), San Francisco/Oakland/San Jose (7.4 percent), Los Angeles (7.2 percent) and Austin (6.5 percent). Conversely, Dallas (3.4 percent), Cincinnati (3.6 percent), Denver (4.5 percent), New York City (4.5 percent), Washington, D.C. (4.7 percent) and Philadelphia (4.9 percent) experienced lower-than-average rate increases in 2012.
Aon Hewitt’s survey uses data from 466 large U.S. employers representing 14.9 million participants, more than 1,200 plans and $63.1 billion in 2012 health care spending.
According to Aon experts, employers are reassessing their role as a health care benefits provider and subsidizer. According to another recent Aon Hewitt survey and one by Milliman, most employers plan to continue sponsoring a medical plan for their employees. However, they are migrating from a traditional “managed trend” approach to a “house money/house rules” approach that is more requiring of employees and integrates a pay-for-performance philosophy into their benefit programs. This strategy includes elements of wellness and health programs to reduce the amount of care required, so-called consumer-driven plans under which employees cover more costs, and cost-cutting plans that replace copays with coinsurance, use generic prescriptions and mail order refills, and surcharge for working spouses or additional dependents with coverage available elsewhere.
While it still an emerging trend, a growing number of employers are also showing interest in a corporate health care exchange model that enables employers to manage the growth of their subsidy and allows employees to select from a greater set of health plan alternatives. Aon Hewitt’s research finds that more than 40 percent of employers are considering moving to a corporate health care exchange model in the next three-to-five years.
Source: Aon Hewitt