As 2015 comes to close and we look forward to 2016, it’s hard not to anticipate what lays head. One thing seems certain year after year: Cost of medical insurance under a group program continues to increase, despite assurances from the government that healthcare reform would curb some of the exorbitant costs.
Employers and employees alike have felt — and will continue to feel — higher insurance costs, which have increased at a higher rate than inflation. To put it in perspective, the Kaiser Family Foundation/Health Research & Educational Trust (HRET) 2015 Employer Health Benefits Survey found that since 2010 deductibles for all workers have risen almost seven times as fast as wages and inflation.
Keep in mind, there are a number of factors present, which will shape future costs. Specifically:
The group insurance market will continue to develop premiums based on a workforce — and an overall population — that is aging up;
An aging population demands higher utilization of services and is a key factor that affects the development of the insurance premium;
Consolidation of carriers and provider systems will continue as the arms race for market share will remain a front page story;
History teaches us that during a change over into a new presidential administration (as we will have in 2017), there will not be new significant domestic policy change in 2016, unless it is related to national security.
2016: Slight increases
For 2016, insurance premiums in the group market will most likely continue to move up in the high single digit to low double digits increase (8-12%) before adjustments are made to the plan, for example, raising deductibles and co-pays.
Also, most likely there will be little movement in deductibles and co-pays in 2016, since this cost sharing/transferring to the employee tactics are at levels today that are creating issues for employees when compared to their gross or net income. In other words, the percentage of pay (on either a gross or net basis) that the deductible represents is very high today for the majority of the workforce. Again, a variety of reports highlight deductibles and co-pays increasing at a higher rate than the rate of increase in pay for the majority of the workforce.
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When contribution to the plan (payroll deduction) is factored in as well, a clear picture presents itself. Transferring more incremental cost to the employee is a losing strategy from an employee satisfaction and retention strategy. For the employer, the need to retain employees is strong and absorbing additional cost in the benefit plan will have strong short-term consideration.
Next year is the “dress rehearsal” for 2017 as companies prepare for the introduction of the Cadillac tax. With employees in so many companies and industries affected by the excise tax, there will be significant pressure to do something to avoid the tax.
The bottom line: the U.S. can expect status quo for 2016, with the exception of a small adjustment here or there.
Braun is executive director of Benefit Advisors Network and its sister organization, National Benefits Center — together comprising an exclusive, national network of independent employee benefit brokerage and consulting companies. For more information, or to reach him, please visit: benefitadvisorsnetwork.com or email Braun at pbraun@benefitadvisorsnetwork.com.
