How Health Care Costs Affect Employers, Employees

June 6, 2014 ( – Employers need to think about how they can reduce health care costs, using options such as exchanges and consumer-driven health plans (CDHPs), said Evolution1, Inc.

By Kevin McGuinness | June 06, 2014
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“There are many market drivers occurring: health care costs are increasing, more regulatory changes are being enacted to contain health care costs; employees require more communications about public and private exchanges; and more technology solutions are being developed to address regulatory changes and to improve self-service capabilities for employees,” said Heather Andrews, vice president of Enterprise Partner Development for Evolution1, during its recent “Health Plan Essentials for Private Exchange and Defined Contribution Strategies” webinar.

“There are also a number of emerging trends relating to health care, which include widespread interest in private exchanges and employers remaining committed to keeping health plans in place for their employees,” Andrews added. She cited additional trends that include: health care costs growing in 2013 by 6.3% and the cost being shifted to employees’ responsibility; health care reforms doing little to decrease costs or reduce spending; consumer-drive health plan (CDHP) enrollment growing, matching enrollment in health maintenance organizations (HMOs); and health management programs stressing innovation and engagement to impact the cost of chronic conditions, which represent the bulk of spending.

Andrews noted that “health care is a major expense and is getting larger.” She said research finds that, according to Milliman, for a family of four:

  • The total annual health costs (about $22,030) are the equivalent of tuition for an in-state public college;
  • Annual employee premium and out-of-pocket costs (about $9,150) are the equivalent of groceries for that family for a year; and
  • Annual employee out-of-pocket costs only (about $3,600) are the equivalent of gas for a year for that family.

When it comes to private exchanges, some 40 million consumers are projected to be enrolled in a private exchange over the next five years, said Nitra LaGrander, vice president of Strategic Markets for Evolution1.