It may still be considered the leanest state and among the nation’s healthiest, but Colorado employers are seeing a large increase in the cost of medical benefits in the coming year, a survey released on Thursday shows.
The Lockton Denver Benefit Group’s 13th annual Colorado employer survey on health benefit costs and coverage shows the cost of medical coverage for 2014 will increase at much higher than expected rates in the state.
The survey revealed that the average Colorado employer received a renewal rate increase on their existing health plan of 10.9 percent, calculated before plan changes or other options were considered.
That rate is up from last year’s low of 7.4 percent, it’s higher than many other sources had predicted elsewhere in the country, and it ends a two-year trend of increases of less than 10 percent, the survey shows. The rate is far above the projected national average at reported by AON/Hewitt of 6 to 7 percent.
“Last year our rate increase was more similar to the national norm,” said Bill Lindsay, president of Lockton Benefit Group in Denver and the author of the survey. “This year we’ve gone in the other direction.”
Colorado is considered one of the healthiest states in the country, and it ranks at the leanest in the U.S.
The America’s Health Rankings report from United Health Foundation ranks Colorado as the 11th healthiest state, not far behind the top three of Vermont, Hawaii and New Hampshire. According to the state’s own Colorado Health Foundation, Colorado is the leanest state in the U.S., and the foundation gives the state a grade of “B” for the overall health of its adults.
If it’s not the health of its citizens that’s driving rising health rates, what’s causing the rises?
“That’s the $64,000 question,” Lindsay said. “There’s no empirical evidence to show why rates are what they are.”
Reaching for answers, Lindsay attributed the rising rates to a possible “series of variables” that include rising hospital profits and more hospital construction, and the fact that the state has a large number of small businesses that may be less capable of dealing with rate hikes that big corporations.
“They tend to have more small employers here, so costs tend to be higher,” Lindsay said.
Employers aren’t the only ones taking a hit. The survey shows that the average increase after plan changes, increases to employee percentage cost share, or changing carriers, was 6.4 percent. That’s up from 5.3 percent in 2013.
What that means is that to deal with the rising costs, employers are taking actions like changing up their health plans by making alterations that include raising deductibles, and they are asking employees to share the burden more, Lindsay said.
“The employer is shifting part of that 10.9 percent increase to the employee,” Lindsay said. “The money is still being paid, it’s just not only being paid in higher premiums, but in out of pocket expense by the employee.”
Brokers should take note that the report also asks employers where they are turning to in order to get trusted information to make benefits decisions.
“Brokers this year were rated No. 1 by a long shot,” Lindsay said, adding that those companies that are getting a big increase are looking to their brokers find ways to get it down.
“My advice is make them aware that just because the insurance company says this is what your renewal is, that there are a lot of other options out there,” he said.
The survey shows that while half of Colorado employers surveyed reported they were somewhat familiar with the concept of health insurance exchanges, 89 percent said they intend to continue their employer-based coverage in 2014 and they are not considering sending their employees to the Colorado marketplace.
Other findings in the survey show: 86 percent of employers expect to pass a percentage of their cost increase on to their employees (up from 75 percent last year); the impact of health care reform is one of the top concerns of employers, second only to the total cost of care; 38 percent of the employers surveyed offer a health savings account/high deductible health plan; 22 percent of those without a health savings account plan are considering offering one in 2014; the number of employers offering an HMO increased to 30 percent from 26 percent last year.
The survey was sent to 667 Colorado employers, and respondents were selected based on size, industry, and visibility in the community to get a representative sample of Colorado employers.
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