Employer premiums on health care plans increased more this year than they have in the past five years—but companies are responding by continuing to pass the costs onto workers and also reducing their prescription drug coverage, according to the 2017 United Benefit Advisors Health Plan Survey.
Premium renewal rates for employer-sponsored health insurance rose an average of 6.6% —a significant increase from the five-year average increase of 5.6%, according to responses from 20,099 health plans and 11,221 employers.
On the high end, Connecticut saw a record 24% increase in premiums in 2017, up to $655 from $530 in 2016; and New York saw a large increase of 14%, up to $712 from $624. However, some states saw decreases in premiums, such as Arizona and Washington, which saw 2% and 10% decreases, respectively.
For all employer-sponsored plans, average employee premiums for single coverage rose 4.5%, up to $532 from $509 in 2016. Average employee premiums for family coverage rose 3%, up to $1,272 from $1,236.
Average annual total costs per employee increased from $9,727 to $9,935. However, 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.
“Premiums have been holding relatively steady the last few years, and while this year’s increases are not astronomical, their departure from the trend does warrant attention,” UBA’s president Peter Weber said. “To mitigate these rising costs, employers are shifting more premium onto employees, offering more lower-cost consumer-directed health plans and health maintenance organization plans, increasing out-of-network deductibles and out-of-pocket maximums, and leveraging continued extensions on the ability to ‘grandmother.’”
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, 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).
Employers are also defraying health care costs even further by “dramatically” shifting prescription drug costs to employees in the form of increasing the number of coverage tiers and adding coinsurance, compared to copays, Weber said.
Almost three-quarters (72.6%) of prescription drug plans now have four or more tiers, while 27.4% have three or fewer tiers. Nearly a third (32%) of all plans have six tiers, up from 2% a year ago.
More and more employers are also beginning to self-fund health plans in an effort to reduce costs. 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 percent 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 health care reform,” Weber says. “For small employers with healthy populations, self-funding may be particularly attractive since fully insured community-rated plans under the ACA don’t give them any credit for a healthy group.”