The company said its projections are based on an annual study of trends in health premiums which it has performed since 1981. The study, based on data from the annual Hay Benefits Prevalence Report (HBPR) and the Federal Employees Health Benefits Program (FEHBP), indicates a strong correlation between increases in health premiums for employers, as reported in the HBPR, and increases in FEHBP health premiums, as reported by the U.S. Office of Personnel Management.
Though the annual rates of increase of premiums for employer sponsored health plans have declined significantly since 2003, the trend rates for the FEHBP program have reversed and risen in both 2009 and 2010. Since FEHBP health premium trends are often leading indicators of premium trends for employers, Hay Group says this suggests that the recent history of declines in the annual rate of premium increases may be coming to an end.
Cost Shifting Increasing
Hay Group’s Trends in Health Premiums report points to a steady increase in health care cost shifting from employers to employees. Prior to 2008, the four types of primary plan designs were traditional fee-for-service plans (FFS), preferred provider organizations (PPO), point-of-service plans (POS), and health maintenance organizations (HMO), but beginning in 2008, high deductible health plans (HDHP) replaced fee-for-service plans as one of the four primary plans.
Though PPOs now represent the single most common form of coverage, accounting for six out of ten employers’ plans, data from 2008 and 2009 suggest an emerging trend towards more HDHPs.
According to the report, a decade ago, almost half (49%) of all employers paid the full cost of single coverage and a quarter paid the full cost of family coverage as well. From 1990 to 2009, the number of employers paying the full premium cost decreased by 38 percentage points for single coverage (to 11%) and by 21 percentage points for family coverage (to 4%).
In addition, the average contribution among those employers that do not pay the entire cost of coverage has declined somewhat. When employee contributions are required, they average approximately 20% for single coverage and 25% for family coverage, according to Hay Group data.
The full report can be downloaded from here.