Two states saw record premium increases. Employers are reacting by shifting more expenses to employers.
Premiums for employer-sponsored health insurance coverage rose an average of 6.6% in 2017, up from the five-year average increase of 5.6%, according to new data.
The increase is fairly modest but the departure from a five-year trend could signal trouble for employers and employees alike, as companies are looking for ways to transfer more of the higher expenses to workers.
The 2017 United Benefit Advisors (UBA) Health Plan Survey indicates that two states saw record premium increases for employer-sponsored programs in 2017: 24% in Connecticut, up to $655 from $530; and 14% in New York, up to $712 from $624.
Employee premiums for all employer-sponsored plans rose from an average $509 in 2016 for single coverage to $532 in 2017 and from $1,236 to $1,272 for family coverage (a 4.5% and 3% increase respectively). The average annual total costs per employee increased from $9,727 in 2016 to $9,935 in 2017.
However, employers did not absorb all of those increased expenses. The employee share of total costs rose 5% from $3,378 to $3,550, while the employer's share rose less than 1%, from $6,350 to $6,401. Peter Weber, President of UBA, says rising health plan costs are forcing employers to shift more premium dollars onto employees, offer more lower-cost consumer directed health plans (CDHPs) and health maintenance organization (HMO) plans, and increase out-of-network deductibles and out-of-pocket maximums.
“Premiums have been holding relatively steady the last few years,” Weber says. “And while this year's increases are not astronomical, their departure from the trend does warrant attention.”
The research also shows reductions in prescription drug coverage to defray increasing costs even further. For a second year, prescription drug plans with four or more tiers are exceeding the number of plans with one to three tiers. Almost three-quarters (72.6%) of prescription drug plans have four or more tiers, while 27.4% have three or fewer tiers, the survey shows.
Even more surprising, Weber says, is that the number of six-tier plans has surged, accounting for 32% of all plans, when only 2% of plans were using this design only a year ago.
Median in-network deductibles for singles and families across all plans remain steady at $2,000 and $4,000, respectively. Single out-of-network median deductibles saw a 13% increase in 2016, the survey indicates, and a 17.6% increase in 2017, from $3,400 to $4,000. Both singles and families are facing continued increases in median in-network out-of-pocket maximums (up by $560 and $1,000, respectively, to $5,000 and $10,000).
The number of employers using self-funding grew 48% for employers with 25 to 49 employees in 2017 (5.8% of plans), and 13.4% for employers with 50 to 99 employees (9.3% of plans).
Overall, 12.8% of all plans are self-funded, up from 12.5% in 2016, while almost two-thirds (60.9%) of all large employer (1,000+ employees) plans are self-funded.
“Self-funding has always been an attractive option for large groups, but we see self-funding becoming increasingly desirable to all employers as a way to avoid various cost and compliance aspects of healthcare reform,” Weber says. “For small employers with healthy populations, self-funding may be particularly attractive since fully insured community-rated plans under the Affordable Care Act don't give them any credit for a healthy group."
Gregory A. Freeman is a contributing writer for HealthLeaders.