According to the 2013 Health Plan Survey from United Benefit Advisors, private-sector employees are taking on more costs for their own health care, facing higher deductibles and out-of-pocket cost increases in recent years. The survey reveals they are also bearing more as taxpayers by assuming a higher percentage of health care costs for public-sector employees.
The survey finds public employer health care cost per employee increased 22% from $7,001 in 2012 to $8,551 in 2013, while employer cost in the private sector increased only 15.8% from $5,226 in 2012 to $6,040 in 2013. The portion an employee pays decreased for both during that same time period, but by nearly 30% (or $1,025) for a public-sector employee and only 15.7% for a private-sector employee. As a result, taxpayers assumed an additional $1,681 or 24.28% of a public-sector employee’s health care cost.
The private sector has controlled costs better than public employers, according to the survey results, by using plan designs that shift more upfront cost to a strategy proven to decrease total cost. These plans, known as consumer-driven health plans (CDHPs), grew from 22.5% to 24.1% of all plan types offered across all industries and size groups.
However, the survey also reveals a majority of public-sector health care plans are still considered “Cadillac plans” or rich in costly benefits that have been stripped from most private-sector health care plans. This, say the survey’s authors, potentially put the public sector at risk of facing the forthcoming “Cadillac Tax.”
Under the Patient Protection and Affordable Care Act (or ACA), health care plans that cost more than $10,200 for individuals and more than $27,500 for families will face a 40% tax on the amount over the threshold.
“When the Cadillac Tax takes effect in 2018, almost all local and state governments will face huge penalties unless they get their costs under control,” says Thom Mangan, CEO of United Benefit Advisors, based in Indianapolis, Indiana. “For example, the average municipality in Illinois and Massachusetts will pay $5,000 per employee in 2018. By 2020, the penalty for family coverage will skyrocket to $9,202 in Illinois and $19,699 in Massachusetts. Unfortunately, those penalties are passed to taxpayers, who are facing their own health care cost increases.”
The survey results show private-sector employees with dependents have been hit hardest, where the average annual premium (employee contribution) has increased by 1.5% since 2012 and 19.7% since 2009. A public-sector employee, however, saw his/her annual contribution for dependents decrease by 3.05%, from $4,716 in 2012 to $4,572 in 2013.
In addition, the total cost of employer-sponsored health care plans has increased at an average rate of 21% for both public and private industry during the past five years. However, the private sector has better controlled costs in recent years. The annual total cost for the public sector increased by 5.4%, from $10,356 in 2012 to $10,914 in 2013. In the private sector, annual total cost increased only 2.8% in the same time period, from $9,032 to $9,282 in 2013.
Out-of-pocket maximums were found to be much higher in the private sector, with the average employee facing an in-network maximum of $3,721 for a single adult and $8,258 for a family, compared with a public-sector employee who faces an in-network maximum of only $2,262 for a single adult and $6,032 for dependents. The differences in out-of-network/out-of-pocket maximums is even more extreme, say the survey authors, with a private-sector employee facing a family maximum nearly $5,000 higher than that of a public-sector employee.
Deductibles are another area where private-sector employees face higher upfront costs. The average in-network deductible for a public-sector employee in 2013 was $1,356 for a single adult and $3,064 for a family. A private-sector employee will pay $1,891 for a single adult and $4,323 for a family, a nearly 40% difference for each.
Average in-network co-insurance dropped from 90% to 82.5% for private-sector employees, but remained at 90% for the public sector.
“The government [or public] sector has always been much more generous with benefits,” says Mangan. “As for wages, despite the deficits they were running, various reports have shown that public sector pay has outpaced private in recent years, even during the recession. Recent public pay freezes have slowed salary growth. However, public-sector employers have made up for income loss to their employees by paying even more for both employee and dependent health care coverage, in comparison with the private sector.”
Mangan concludes that public-sector employers need to get health care costs contained or it may face a crisis in the near future.
Data in the survey is based on responses from 10,551 employers sponsoring 16,928 health plans nationwide. The survey’s focus is intended to provide a current snapshot of the nation’s employers rather than covered employees.
Details about how to request more information about the survey can be found here.