Seattle-based Kibble & Prentice announced the results of its annual employee benefits survey. With nearly 250 Washington state companies reporting, the results showed two surprising trends: the rate of increase of health plan costs have decreased dramatically, and employers are passing the relative savings along to employees. The full report is available on request via Kibble & Prentice’s Web site at www.kpcom.com.
While Washington state companies still continue to struggle with medical premium increases, the rate of increase has dropped significantly since last year’s study, in which almost 60 percent of employers reported increases of between 11 and 30 percent. This year, the numbers have shifted, with 50 percent of employers reporting increases of between 0 and 10 percent. Decreases are mostly due to companies making significant changes in their benefit programs such as increasing deductibles.
Cost as percentage of payroll
The decline in the rate of premium increases is reflected in the cost of health care as a percentage of payroll. In 2004, 21.5 percent of employers saw the cost between 11 and 15 percent of payroll; this year that number decreased to 15 percent of employers. In 2004, 19 percent of employers saw the cost between 16 and 20 percent of payroll; this year that number was 16.3 percent of employers.
Nowhere were the effects of these changes more evident than in the trend of cost shifting which in the past two years has shown employers passing greater percentages of health care costs onto employees. The trend not only slows this year — it almost reverses. Last year, 53.7 percent of employers increased deductibles for plans, up from 32 percent in 2003. This year, that number dropped to 31 percent. Whereas last year, 30 percent increased office visit co-pays and prescription drug co-pays, this year only 25 percent did. Last year, 30 percent increased employee coinsurance or out of pocket maximums, this year only 13 percent report doing so.
This employee-favorable trend regarding cost-shifting will continue next year. Only 13.7 percent of employers say they will increase deductibles, a significant decrease over last year’s 35.4 percent and even below 2003’s 23 percent. Less than 10 percent indicate they will increase prescription drug co-pays, compared to last year’s 28 percent and less than 15 percent will increase employee co-insurance, compared to last year’s 20 percent.
Minimal changes in benefits programs
The decline in the rate of increase for premiums did not impact the overall scope of benefits and plans offered by employers. A large majority of employers offer vision, dental, Section 125 Cafeteria Plans, Life Insurance, Long Term Disability, 401k or other profit sharing plans. The most popular perks included gym memberships and parking and transportation subsidies. This year’s survey reported a 10 percent decrease in employers who provide term life insurance and close to 5 percent of employers dropped their dental coverage. Despite the reduction in the rate of cost increase, an overwhelming majority — 92 percent — of employers reported that cost is still the greatest challenge for them regarding employee benefits.
Healthcare Savings Accounts — more information needed
While Healthcare Savings Accounts (HSA) have received much publicity in recent years, Washington state employers have been reluctant to widely adopt them. Last year, nearly 9 percent of respondents had implemented a HSA plan in 2004 while 31 percent reported they expected to in 2005. More than 30 percent (31.1 percent) said they would not implement an HSA. This year, only 4 percent report having instituted an HSA, while 38 percent say they are considering implementing one. Now, nearly 51 percent report that they won’t. This can be attributed to the fact that 60 percent of respondents stated that they still needed more information before making a final decision — that’s up from 30 percent from last year.
“There’s no doubt that employers have had to make tough choices in recent years regarding the cost and the scope of their employee benefit plans,” said Dave Ross, vice president of Kibble & Prentice. “These numbers clearly show that employers are cognizant of the impact that high health care costs have on their employees’ livelihoods, and are using this reprieve in cost increases as a way to make it a little easier for their employees.”
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