employer-health-costs.pngThe latest news on employee benefits costs, particularly health costs, is not good. A battery of recent reports confirms that employers saw their costs rise sharply in 2011 and have fastened their seat belts for more of the same in 2012.

First, the annual Kaiser/HRET Survey of Employer-Sponsored Health Benefits found that in 2011 average annual health insurance premiums for family coverage crossed the $15,000 threshold for the first time. Kaiser also found that over the last decade insurance premiums more than doubled, with the employee share of premiums rising by 131%.

Analysts compared health insurance costs to BLS data on prices and earnings and noted that since 1999 health insurance premiums have risen 160% while workers’ earnings have risen only 50%. In other words, health insurance costs are absorbing a greater and greater share of employee total compensation.

Towers Watson promptly echoed the Kaiser/HRET bad news in its own Health Care Trend Survey for 2011. Anticipating how employers might respond to unrelenting health cost pressures the firm forecast that “2012 looks like a year when we will start to see (employee) costs go up primarily via increased premium contributions, with a higher proportion of the increase borne by families.” Read more.

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Employer Health Costs: Silver Lining in the Clouds?

Mon Nov 14, 2011

employer-health-costs.pngThe latest news on employee benefits costs, particularly health costs, is not good. A battery of recent reports confirms that employers saw their costs rise sharply in 2011 and have fastened their seat belts for more of the same in 2012.

First, the annual Kaiser/HRET Survey of Employer-Sponsored Health Benefits found that in 2011 average annual health insurance premiums for family coverage crossed the $15,000 threshold for the first time. Kaiser also found that over the last decade insurance premiums more than doubled, with the employee share of premiums rising by 131%.

Analysts compared health insurance costs to BLS data on prices and earnings and noted that since 1999 health insurance premiums have risen 160% while workers’ earnings have risen only 50%. In other words, health insurance costs are absorbing a greater and greater share of employee total compensation.

Towers Watson promptly echoed the Kaiser/HRET bad news in its own Health Care Trend Survey for 2011. Anticipating how employers might respond to unrelenting health cost pressures the firm forecast that “2012 looks like a year when we will start to see (employee) costs go up primarily via increased premium contributions, with a higher proportion of the increase borne by families.”

Reporting on the Towers Watson survey, Employee Benefit News said two-thirds of employers would increase employees’ share of premiums and 57% of large employers would consolidate plan choices and move to adopt account-based plans.

If we weren’t completely convinced, the National Business Group on Health, a nonprofit association of large employers, surveyed some of the largest corporations in the U.S. and found that they expect their 2012 health benefit costs to rise by 7.2% in 2012. In response employers plan to adopt more aggressive cost control measures, including greater premium cost sharing, higher deductibles and a sharper focus on consumer-directed health plans.

Said association president Helen Darling,

“Employers are facing a multitude of challenges posed by rising health care costs, the weak economy and the financial and administrative impact of complying with the new health reform law. As a result, employers are being much more aggressive in their use of cost-sharing techniques and cost control programs, and are making certain that employees have more reasons to be cost-sensitive health care consumers.”

Finally, the U.S. Department of Labor, in its employment-cost index for the third quarter released in late October, reported that benefit costs in the private sector were up 4% year-on-year, more than double the increase in wages and salaries. The Wall Street Journal concluded that “the more that companies have to spend on benefits, the less take-home pay goes to workers.”

And in a real-world example of how health costs can squeeze employers in a stagnant economy, Wal-Mart announced in October that it would cease offering health coverage to part-timers and increase the share of premiums paid by other workers. With well over 1 million employees the Wal-Mart decision could serve as a bellwether for how other employers respond to health cost pressures.

Notwithstanding the gloomy forecast of higher health costs and a slower economy there may be a silver lining: greater consumer responsibility for health cost management.

As the recent NBGH survey found, nearly three-fourths of larger employers will offer a consumer-directed health plan (CDHP) in 2012, the most common type being a high-deductible plan with a Health Savings Account (HSA).

More and more employers are coming to the conclusion that the most promising avenue for health cost containment is a partnership with employees to share costs and manage coverage decisions, including an emphasis on employee wellness, benefits innovation and health management.

Skeptical that the new healthcare reform law will “bend the cost curve” as advertised, indeed suspecting it could actually put upward pressure on health costs, more employers appear to be giving consumer-directed health a chance.

That silver lining could not only contain health costs but help Americans lead healthier lives.