Health premiums in 2004 are expected to increase 7.4%, a lower amount attributed by Fidelity in the firm’s ” Changing Benefits, Critical Decisions: The Health Benefits and Behavior Study” report to cost containment strategies. After the 7.4% increase, this year’s total premium cost to employers and employees combined, will average $7,281 per employee, up from $6,779 in 2003.
“Our 2003 annual enrollment data suggest that both plan adjustments made by employers and changes in employee behavior positively contributed to an overall mitigation of health plan cost increases in 2004,” Brad Kimler , senior vice president, Fidelity Health and Welfare Consulting said in a news release. “Eighty-four percent of employees faced 2004 contribution increases to their current plans and 66% faced plan design changes. These plan adjustments may have encouraged employees to consider their enrollment elections more carefully, resulting in a number of them migrating from higher-cost to lower-cost health plans.”
Breaking down the total, employees will pay an average of $1,233, up from $1,107 last year. Combining both the employee share of the premium and expected out-of-pocket costs, the total amount employees will pay for their health care in 2004 rises to $2,450, an increase from last year’s total of $2,042. Thus, the total health care cost per employee for 2004, including premium and expected out-of-pocket costs, will average $8,498, up from $7,713 in 2003.
Overall, employees will pay more for their health-care this year, covering nearly 29% of the total cost, compared to more than 26% last year. Even though employees are paying more, it is important to note that employers are still paying the majority of health care expenses: 71%.
Kimler found the design changes coupled with the contribution increases shifted the participant paradigm to think more like consumers in their health plans. As evidence of this contention, Fidelity found contribution increases of 10%-20% percent appeared to be the point at which employee behavior was impacted, causing 5% of enrollees to leave their 2003 plan. On the flip side, small declines in contributions had little influence on employee behavior.
Also impacted was enrollment behavior, driving employees to make more informed decisions in the face of rising out-of-pocket costs. To illustrate this point, Fidelity found more employees (20%) to be using health care flexible spending accounts ( FSAs ) in 2004 than 2003 (16%). Further, more money was being diverted into this accounts. The overall average deferral increased by 7% for 2004; while over one third (39%) of returning FSA users increased their 2004 contributions by an average of 70% to $1,461.
To enroll in their company’s health-care plan, employees are increasingly turning to the Internet. Eighty-seven percent of employees submitting new enrollments for 2004 did so online, up from 71% in 2002 and more than doublethe Web enrollment rate for 1999.