Benefits Consultants Report Continued Group Health Rate Increases

As the health care reform debates rage in Washington, employers are continuing to see steady increases in rates for group medical coverage, according to a recent survey by The Council of Insurance Agents & Brokers.  The Council’s semiannual Employee Benefits Market Survey shows employers of all sizes continuing to experience group medical coverage rate increases and choosing to shift more of those costs along to their employees through higher deductibles and co-pays, but few employers looking to discontinue group medical coverage as an employee benefit.

“As the prolonged economic downturn continues to hit employers’ bottom lines and rates continue to rise in excess of inflation, many corporate clients are being forced to pass on more of the costs of group medical coverage to their employees,” said Ken A. Crerar, president of The Council.  “However, the survey also shows that most employers aren’t looking to do away with this important employee benefit despite these issues.”

“Employers’ reluctance to eliminate group medical plans despite tight budgets shows the value that they place on such plans in attracting and retaining employees,” Crerar said.  “Congress is beginning to seriously consider the elements of health care reform, and must recognize that employer-sponsored health care does work for millions of people across the U.S.  Wiping clean the slate of health care options for employer-sponsored health-care would cause more problems than it would solve.”

Of the benefits consultants responding to the survey, 87 percent said rates had increased for small accounts, those with 50 or fewer employees.  Eighty-nine percent said rates increased for medium accounts (51-500 employees) and 67 percent saw increases in large accounts (501+ employees).  

Fifty-three percent of small and 68 percent of medium accounts saw rate increases 6-15 percent, while only 50 percent of large accounts saw rate increases in the 6-15 percent range.  “Carriers appear to be much more aggressive in pricing,” commented one consultant.  “Trend is escalating,” said another.

Employers continue to look at options to cut their costs in the face of continuing rate increases.  One consultant said, “Deductibles, coinsurance and co-pays have increased drastically – plans are becoming more cost sharing.”  Another commented, “Carriers in our region are developing higher deductible plans in response to the need for low cost options in this economy.”

Employers are also looking to employees to shoulder a higher percentage of premiums costs, with more than 50 percent of respondents saying that over half of their clients have chosen this option.  “A majority of plan sponsors have elected to increase deductibles and make other design changes for the purpose of reducing cost increases,” said one respondent.  However, employers are not looking to drop health coverage completely, with 85 percent of respondents saying that only 1-10 percent of their clients are considering this option.

High Deductible Health Plans/Health Savings Accounts remain of great interest to employers, but not as the sole health care offering.  Fifty-seven percent of consultants said clients see HDHPs/HSAs as a plan option rather than for replacement of an existing plan.  Small, medium and large accounts continue to implement the HSA option at around the same pace, and employer contributions to HSAs generally fall within the $250-$749 range.

The benefits consultants also said that group life insurance renewal rates remained stable or dipped slightly for all size accounts.