Survey points to decline in employer-sponsored health insurance
Smaller employers more likely to feel effects of health care overhaul, benefits expert says
Thursday, September 12, 2013 5:00 AM
Iowa employers are continuing to take steps to mitigate health insurance cost increases for their workers, but they’re also expecting employees to take more responsibility for their health, according to an annual statewide benefits survey.
How many employers are willing to pay rather than play?
More than 3 percent of smaller companies said they plan to drop their employee health care coverage next year and would be willing to pay the $2,000-per-employee penalty, according to the 2013 Iowa Employer Benefits Study.
That question was posed prior to the Obama administration’s announcement in June that it would delay enforcement of the employer mandate until 2015.
Among employers with between 50 and 250 workers that are subject to the employer mandate, 3.1 percent said they planned to discontinue offering coverage in 2014. None of the larger employers with 250 or more workers said they would drop coverage, however.
The smallest employers - those with fewer than 50 employees - were most likely to say they might discontinue health coverage in the next three years because of the Patient Protection and Affordable Care Act.
Among other findings specific to the federal health care overhaul:
- Smaller employers are less likely to feel they’re prepared to meet the new requirements of the Affordable Care Act in 2014.
- Employers of all sizes said they wouldn’t be likely to discontinue health insurance coverage just because other employers did.
- Employers said it was a little more likely they’d consider discontinuing coverage if premiums rose twice as fast as inflation.
- Small employers were more likely than larger employers to say they may discontinue coverage due to the “Cadillac tax” that will go into effect in 2018.
On average, health insurance premiums for employer-based policies increased by 9 percent from 2012 to 2013, according to the 2013 Iowa Employer Benefits Study, released today by David P. Lind Benchmark in Clive. That’s a slightly bigger bump than the 7 percent average increase in premiums a year ago. Smaller employers faced larger percentage increases in 2013 than larger companies.
Total premiums, after employers made changes to their insurance plans, increased by a modest 3 percent for single coverage and less than 5 percent for family coverage. The net increase in premium outlays was similar to recent national findings from an annual survey by the Kaiser Family Foundation, said David Lind, the firm’s principal.
“Employers are finding ways to keep their plans palatable for their employees by keeping premiums down as much as possible,” he said.
The survey results also show that the percentage of employers offering health coverage is declining, particularly among small businesses with fewer than 50 employees. Overall, just under 77 percent of respondents said they offered health insurance, a decrease from 81 percent last year and 83 percent two years ago. Health care coverage by businesses with between 10 and 19 employees dropped to 68 percent, down from 85 percent two years ago.
Also, more employers are encouraging their workers to use preferred network health providers to lower costs and are providing incentives for employees who meet milestones to improve their health. Overall, 42 percent of respondents said they encourage the use of high-quality providers; 11 percent reward employees based on meeting health outcome goals. The largest employers, those with 1,000 or more people, are most likely to use incentives.
The results of the survey were based on 1,054 responses from more than 4,300 randomly selected employers.
The survey, which Lind has conducted for the past 15 years, provides a history of the double-digit health premium increases that helped to prompt federal efforts to curb soaring costs.
To put health insurance cost increases in perspective, the average total premium for family coverage in Iowa is now $14,221, a 158 percent increase from the $5,508 average premium when the survey was first conducted in 1999. By comparison, average U.S. family premiums in the same 15-year period increased even more – by 182 percent.
For the first time this year, Lind has added questions specific to changes in federal health care laws, which offers a glimpse at emerging attitudes of Iowa employers as the nationwide health insurance overhaul unfolds, he said. (See sidebar to the right.)
Actions taken by employers this year in response to premium increases generally favored workers. Fewer employers passed premium increases along to their workers, and a larger percentage of companies absorbed the entire cost increase this year compared with last year. Also, a smaller percentage of employers raised out-of-pocket maximums and co-payments. As a result, the average annual outlay for a single covered employee actually decreased by $100 to $965, a 9.3 percent decrease. The average employee contribution for a family plan increased by less than 1 percent, to $4,688. These year-over-year changes in premium costs don’t include out-of-pocket costs such as prescription and office visit copayments, however.
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