For many companies, health insurance open enrollment season is approaching, and for 2018 they can expect higher premiums. A 4.3 percent increase is projected, even after firms make plan changes such as raising deductibles or switching carriers, according to early responses from a national survey of employer plans done by Mercer, national HR consultants.
“Employers are facing the biggest premium increase since 2011,” says William Lovy of Mercer in Manhattan. In particular, employers face drug costs rising about 7 percent next year due to new specialty medications, according to Mercer.
As companies work to provide adequate coverage amid rising costs, they’re forced to compare plans by price and shift more of the cost burden to employees.
- Many Long Island firms will find themselves forced to switch carriers by the exit of CareConnect, Northwell Health’s insurance unit, from the New York marketplace, says Kathleen Brennan, president of Bohemia consultants 360 Insurance Services. Northwell has said CareConnect will stop writing or renewing group policies on Nov. 30.
- CareConnect “was among the lower-priced insurers in the marketplace,” Brennan says. “Most likely the replacement coverage will cost significantly more.”
- ACA HIT. Employers also face in 2018 the return of the Affordable Care Act’s health insurance tax (HIT), which adds 3-3.5 percent of additional costs onto a small employer’s fully insured health plan, says Lovy. The tax had been suspended for 2017.
Capitol Hill wrangling over ACA federal cost-sharing subsidies to insurers has created uncertainty, but the potential elimination of the subsidies won’t impact this open enrollment season for employer plans, according to Mercer. Still, employers care about this issue, because a stable individual market is a source of coverage for benefit-ineligible employees, Mercer said in a blog post last week.
- Many employers have tried controlling costs by redesigning their health plans (i.e. moving to plans with higher deductibles and copays) and increasing the employee’s share of health care costs, Lovy says.
- Workers’ average contribution to family premiums has increased 32 percent since 2012, while employers’ share went up only 14 percent, according to a 2017 survey by the Kaiser Family Foundation/Health Research Educational Trust. Workers contribute an average of $5,714 annually toward family premiums, and those at firms with fewer than 200 workers contribute more — $6,814 on average, according to Kaiser.
- Splitting the difference. For Dede Gotthelf, owner of 91 Hill LLC, which owns and operates the Southampton Inn, premiums for 2018 will likely go up about 8.1 per cent. Last year the inn absorbed substantial increases and switched carriers, she says, but this year it will likely split some of the hikes with employees.
“If the company is able to carry the increases, we will,” she says, noting the firm spends more than $100,000 a year on health insurance.
- Weigh options. Gregg Pajak, president of WizdomTree Benefit Solutions, an Islandia consulting firm, says employers need to think outside the box.
- PEO. One option is partnering with a professional employer organization, which involves entering into a co-employment arrangement, he says. A PEO administers HR functions for multiple businesses and can often negotiate better rates with a carrier, but firms have to weigh the health savings against PEO administrative fees, he says.
- HRA. Another option: pairing a high-deductible plan with a Health Reimbursement Arrangement, where an employer contributes to that account for each employee to offset employees’ higher deductible. Small firms can also purchase insurance through a commercial exchange like HealthPass to benefit from economies of scale, says Pajak.
Percentage of employers that plan to take steps to reduce the growth of health insurance costs in 2018. Without changes, employers could expect a 6% increase in costs for the plans they offer employees.