Health insurance premiums still greatly exceed inflation, but employers are increasingly adopting new techniques to gnaw away at rising costs.
Despite increasing efforts by employers to engage in techniques to lower the cost of healthcare, more than half of U.S. companies experienced a 5% increase in health insurance premiums this year, and 25% saw increases of 10% or more, according to Arthur J. Gallagher and Co., which surveyed 3,107 employers for its annual 2016 Benefits Strategy and Benchmarking Survey.
That's clearly unsustainable in tandem with a rate of general inflation that averaged 1% over the 12 months between June 2015 and the same month in 2016.
Additionally, more than 77% of respondents said they expect their revenues to remain the same in 2017 or increase slightly.
Employers are beefing up the arsenal of tools they think will help bring down the rate of premium inflation over time. Those tools range from defined contributions for employee health premiums, to narrow network plans, to high deductible health plans to telemedicine.
Survey respondents noted the cost-containing tactics they are employing today as well as those they intend to employ within two years.
Telemedicine is one of the most prevalent cost control measures with 24% of employers adding that option to their health plan largely because they are lower cost than traditional visits. By 2018, based on the survey, 42% of employers plan to employ telemedicine as a viable option.
Narrow network plans, which restrict employees to a smaller group of providers that exchange higher reimbursement for volume certainty, are also gaining in popularity. Some 18% of employers already use narrow networks, and 27% expect to within two years, which would be a 50% increase.
Telemedicine's Future on Display Now at UnityPoint Health
Just 2% of employer use defined contributions, essentially providing employees with a lump sum to use in finding and buying their own insurance. The practice is expected to balloon by 650% within two years, as 15% of employers expect to use it by 2018.
This would be a dramatic shift, as defined contributions essentially get employers out of directly provisioning health insurance entirely by forcing employees to choose their own benefits. It also appeals to employers because it provides cost certainty.
Some 30% of respondents have offered employees access to private exchanges to choose their coverage.
Only 47% of employers expressed confidence in the effectiveness of healthcare cost management in their current benefit strategies.