Health Benefit Costs Grew a Modest 2.6% In 2017

Health Benefit Costs Grew a Modest 2.6% In 2017

The annual cost increases for employer-sponsored health plans remained low in 2017, even without employers moving significant numbers of employees onto high-deductible plans, the results of an annual survey of employer-sponsored health plans conducted by human resources consultancy Mercer indicated.

The survey of a nationally representative sample of 2,481 employers was conducted during the summer of 2017. The results showed that the average total health benefit cost per employee rose 2.6% in 2017, up just slightly from an increase of 2.4% reported in 2016. Citing previous survey data, researchers observed that cost growth has averaged just 3.3% annually over the past five years, compared to 6.2% over the prior five-year period.

But while acknowledging that these growth rates have been modest, researchers warned that health coverage continues to represent an enormous expense for both employers and employees. The survey results showed that for employers, the average total cost of health benefits amounted to $12,229 per employee, or 14% of total payroll, in 2017; and that even among smaller employers (those with 10-499 employees), which typically offer less generous benefits, the average total cost of health benefits came to $11,527 per employee in 2017. The findings further indicated that in 2017, employees were paying, on average, 24% of the total cost of coverage through paycheck deductions.

Researchers also observed that while employee contributions as a percent of premium have been stable for decades, over the past 10 years, employers have assigned employees more responsibility for cost at the point of service, both by increasing deductibles and by adding high-deductible consumer-directed health plans (CDHPs) with health savings accounts (HSAs). The survey found that in 2017, deductibles in traditional preferred provider organization (PPO) plans continued to increase, to nearly $1,000 on average for employers with 500 or more employees and nearly $2,000 for those with 10-499 employees.

However, after years of steady growth, enrollment in CDHPs was found to have risen by only a single percentage point in 2017, from 29% to 30% of all covered employees. The survey indicated that in 2017, just 10% of employers with 500 or more employees offered a CDHP as the only plan at their largest worksite, and that most mid-sized and large employers offered a CDHP alongside higher-cost plans with more generous benefits.

The survey results also showed that employers are increasingly offering tools to help employees make more informed health care decisions: 82% of the employers surveyed with 500 or more employees said they provide a “transparency tool,” or an online resource to help members compare the prices and the quality ratings of different health care providers.

In addition, the survey found that growing numbers of employers are helping plan participants defray the cost of care by promoting access to less expensive services, such as telemedicine. In 2017, 71% of the employers surveyed with 500 or more employees said they offered telemedicine services as a covered benefit, up sharply from 59% in 2016. While the survey showed that employers with telemedicine programs in use in 2016 reported an average utilization rate of 7%, researchers stressed that this rate is expected to rise as the programs become more established.

Looking at the role played by prescription drug costs in driving up overall health benefit costs, the survey found that drug benefit costs have been rising around 8% annually among employers with 500 or more employees, due in large part to an average 15% increase in spending on high-priced specialty drugs. The findings indicated that 53% of large employers are attempting to help keep these costs in check by steering employees to specialty pharmacies, which provide cost management strategies that can also prove less costly and more convenient for patients.

From Benefit Trends Newsletter, Volume 60, Issue 12

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2017 Liberty Publishing, Inc. All rights reserved.

Americans Want Congress to Proceed Cautiously in Repealing the ACA

Americans Want Congress to Proceed Cautiously in Repealing the ACA

As President Donald Trump and Congressional lawmakers make plans for the future of the Affordable Care Act (ACA), the results of a recent survey by the Kaiser Family Foundation suggest that a majority of Americans either do not want the ACA to be fully repealed, or want Congress to refrain from repealing it until a replacement plan is ready.

The survey of 1,204 adults was conducted on December 13-19, 2016. When asked whether Congress should repeal the ACA, 47% said they think Congress should not vote to repeal the law; 28% said Congress should repeal the ACA, but not until the details of a replacement plan have been announced; and 20% said that Congress should vote to repeal the law immediately, and work out the details of a replacement plan later.

The findings also indicated that repealing the ACA falls behind other health care priorities the respondents believe President Trump and the Congress should act on. When asked to name their top priorities in the area of health care, 67% of respondents cited lowering the amount individuals pay for health care, 61% said lowering the cost of prescription drugs, and 45% cited dealing with the prescription painkiller addiction epidemic. By contrast, just 37% of respondents named repealing the ACA as a top priority. Even smaller shares said that decreasing how much the Federal government spends on health care over time (35%) and decreasing the role of the Federal government in health care (35%) should be top priorities.

When presented with two general approaches to the future of health care in the U.S., 62% of survey respondents said they prefer “guaranteeing a certain level of health coverage and financial help for seniors and lower-income Americans, even if it means more Federal health spending and a larger role for the Federal government;” while 31% of respondents said they prefer the approach of “limiting Federal health spending, decreasing the Federal government’s role, and giving state governments and individuals more control over health insurance, even if this means some seniors and lower-income Americans would get less financial help than they do today.”

The survey also asked respondents to predict how their health care will change if the ACA is repealed. More than half of the adults polled said they believe the quality of their own health care (57%) and their own ability to get and keep health insurance (55%) will stay about the same if the law is repealed, while a smaller share (43%) said they believe the cost of health care for both them and their family will stay about the same if the ACA is repealed. Of those respondents who said they anticipate changes, around half said they believe their situation will get better, while the other half said they believe their situation will get worse.

Of the respondents who reported that someone in their household has a pre-existing health condition (56% of the sample), 33% said they believe the cost of health care for them and their family will rise if the ACA is repealed, compared to about 22% of the respondents who said they do not have a family member with a pre-existing condition. The respondents with a pre-existing condition in their family were also more likely than those not affected by a pre-existing condition to say they believe their ability to get and keep health insurance will deteriorate (24% vs. 17%), and that the quality of their own health care will get worse (21% vs. 15%).

From Benefit Trends Newsletter, Volume 60, Issue 3

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2017 Liberty Publishing, Inc. All rights reserved.

The ACA Small Business Tax Credit Is Not Widely Used

The small employer health tax credit, which was established as part of the Affordable Care Act (ACA) to encourage eligible small employers to provide health insurance for employees, has so far had a limited effect, a recently released report by the Government Accountability Office (GAO) indicates.

The report, “Small Employer Health Tax Credit: Limited Use Continues Due to Multiple Reasons,” was presented as a testimony on March 22 by GAO director of strategic issues James R. McTigue, Jr., before the Subcommittee on Economic Growth, Tax and Capital Access of the House Committee on Small Business. The report stated that claims of the tax credit have continued to be lower than the number of potential claimants estimated to be eligible by government agencies and small business groups. The base of the credit is the premiums paid or the average premium for an employer’s state if the premiums paid are higher. In 2016, the credit is 50% of the base unless the business has more than 10 full-time equivalent (FTE) employees or pays average annual wages over $25,900.

According to the report, in 2014 181,004 employers claimed the credit, down somewhat from 188,303 in 2010. McTigue observed that these numbers are relatively low compared to the number of employers eligible for the credit: a GAO report from 2012 indicated that estimates of the number of eligible businesses ranged from 1.4 million to four million. In 2010, the GAO found that claims for the tax credit totaled $468 million, compared to initial estimates of $2 billion by the Congressional Budget Office and the Joint Committee on Taxation. McTigue added, however, that actual claims for the credit had increased slightly in recent years, to about $511 million in 2013 and $541 million in 2014.

The small employer health tax credit has not been widely claimed for a variety of reasons, McTigue said, including that the maximum amount of the credit does not appear to be a large enough incentive for employers to offer or maintain insurance, and that few small employers qualify for the maximum credit amount. For those employers who do claim the credit, he noted, the credit amount phases out to zero as businesses employ up to 25 FTE employees at higher wages. McTigue also pointed out that the amount of the credit is limited if the premiums paid by an employer are more than the average premiums for the small group market in the employer’s state, and that the credit can only be claimed for two consecutive years after 2013.

In addition, McTigue cited GAO research showing that small employers are deterred from claiming the tax credit because of the significant cost and complexity involved. Moreover, he said, surveys of small businesses have shown that many are unaware of the credit. Yet McTigue also noted that IRS has been taking steps since April 2010 to raise awareness about the credit, and to reduce the burden on taxpayers by offering tools to help businesses determine their eligibility for the credit.

Finally, McTigue pointed out that Congress and the administration have proposed a number of changes to the credit, including expanding the size of eligible employers, altering the phase-out rules, and allowing the credit to be claimed in more than two consecutive years.

Benefit Trends, Volume 59, Issue 4

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2016 Liberty Publishing, Inc. All rights reserved.