SURVEY SAYS: How Much Will Your 2005 Healthcare Costs Climb?

October 7, 2004 (PLANSPONSOR.com) - Realizing that it is an increasingly complex effort to estimate such matters on an aggregate basis, we asked readers how much health-care costs would change at your workplace in 2005.

A plurality of this week’s respondents (nearly 35% ) said that costs would increase in the 6% to 10% range, though most in that group clustered at the upper end of that range.   Not that that level of increase was an “accident.”   One reader noted, “We are a manufacturing company averaging around 2,000 employees in 5 states, and we are self insured. Our biggest increases were several years ago, after which we made some serious changes in our plan design (3 tiered drug program, higher deductibles, and higher co-pays).   We also contracted with a local hospital to implement an on-site clinic for employees and insured dependents.”  

Another said, “…at our company the 2005 health-care costs are expected to increase 6% to 8%. The plan design changes we implemented in 2003, i.e., higher co-pays and deductibles, appears to have contained costs for us.”   Yet another admitted, “That’s my guess, and that’s all it is. Our renewal costs are due in early November, so we can adequately prepare cost estimates and enrollment packets for our open enrollment January 1st. The numbers will actually arrive, with our Thanksgiving turkey, from our foot-dragging Carrier.   This creates a frenzy that takes the fun out of Christmas and continues through New Year’s Day.”

The next largest group ( 23.91% ) cited 2005 increases of 11%-15%, including the reader who noted, “I’m reading single digits, plus my broker said yesterday that all the renewals he’s negotiated this year have been in the single digits, so I’m assuming he can do the same for us.”   Another said, ” After just reading in NewsDash that Towers Perrin expects health-care costs to jump only 8% in 2005, I am unhappy to report that it looks like ours are jumping 11.1%.   A lot of that is expected claims . . . so it could be a lot less (‘course it could be a lot more . . .).”

Speaking of a lot more, nearly one in five ( 19.57% ) said they were looking ahead to increases of more than 15%.  “Our carrier ( ) has informed us our renewal premium will increase 16%.   I guess they didn’t read the 2005 Towers Perrin Health Care Cost Survey or the Kaiser Family Foundation report,” said one reader.   Another said, “Unfortunately, our health-care costs are projected to increase by over 15%. The interesting dilemma is that we are a health-care provider so we are supposedly ‘part of the p lem’ yet bearing the brunt in a similar fashion to other employers.   To make matters worse, health-care workers are notoriously ‘big spenders’ when it comes to health care.”   Another said they were looking at that kind of increase “if we maintain the same insurers and plan designs.   To offset some of the cost increase, we are looking at design changes (plan deductibles, co-pays, out-of-pocket maximums, etc.) as well as going self-insured.”  

And there is a lot of “pain” out there still.   One of this week’s respondents said, “We just got our renewal rates and I am still recovering from the shock.   The answer for us is (e) an increase of 41.7%.   (Our increases always come in 3 or 4 times higher than the ‘average increase’ mentioned by the press.)   Unless we significantly reduce coverage (we have a PPO with $1000 deductible), the monthly premium for 5 people will be $4,802.”

But nearly 11% were only anticipating a 1%-5% increase next year, “far better than expected,” one reader modestly explained.   Even in this group, complacency was non-existent.  “Unless we get cold feet, we will offer a high deductible plan with an HAS,” said another reader, who went on to note, “We think that will control our costs.   I’m hoping that this strategy works and doesn’t discourage our employees from routine checkups.   With our design, it shouldn’t, but employee perception is very often different than fact, in spite of all our efforts.”

   

About 6% were actually anticipating either a flat or decreased health-care expense in 2005 – albeit not without some changes.   One noted, “We have made and are making changes that will reduce our cost 10-15% per employee. With health-care inflation projected to increase in 2005 10-15%, the best we can hope for is to break-even.”  One went so far as to note, “We have great news to tell our employees this year.   NO COST INCREASE in the current medical plan!   It’s my fifth year of open enrollments at this company, and for the first time, I don’t have to worry about my tires getting slashed or other retaliations over the historic bad news at this time!”

Finally, about 4% said it was either impossible to ascertain (different types of program rates moving at varying rates), or “other,” including the reader who said, “There is no simple answer to your question… just last week, our health insurance carrier e-mailed their ‘proposed’ 2005 renewal rates which included a 7% rate increase for medical coverage (HMO & PPO), a 19% increase in dental rates, and no increase in vision rates.   In a recent discussion with our CEO (before the renewal rates arrived), I was informed that employees’ share of health insurance costs must increase next year.”   As for “others,” they included the reader who noted, ” Based on our 2004 hiring of recent college grads making up 20% of our insured, our health insurance premiums should decrease (a), an increase of 1%-5% (b) would be ok, an increase of 6%-10% (c) would be irritating, an increase of 11%-15% (d) would be cause to find a new broker, an increase by more than 15% (e) would be cause to fire me, which means the increase is (g) impossible to ascertain (even though we have asked).   I could not think of any other (f) outcome.”

   

But this week’s Editor’s Choice was the reader who noted, “Instead of payroll deduction, my organization has an innovative, new required payment method for the employee portion of the premium.   Employees will be made to pay their premiums with ‘a pound of flesh’ each bi-weekly pay period.    This will provide the company with 1.) employee sharing in the premiums, and 2.) reduced costs on claims related to obesity.”

Thanks to everyone who participated in our survey!

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