Employer Group Health Benefits Costs Soaring

Employee group health benefit costs for businesses continued a rapid increase over the past six months, and a majority of employers, regardless of size, paid a lot more to renew, a producer group reports.

Those findings were contained in the spring Employee Benefits Market Survey by the Council of Insurance Agents and Brokers (CIAB).

Agents and brokers responding to the survey said the cost of group medical care increased for 81 percent of their small accounts–those with 50 or fewer employees. Respondents said 54 percent of renewals were between 11- and 15 percent higher.

Similarly, 90 percent of the agents said their medium-sized clients experienced increases in group medical costs, with 47 percent falling in the 11-to-15 percent range.

Three-quarters of those polled said their large clients–those with 501 or more employees–paid more for their group medical plans, with the largest number of increases (43 percent) in the 6-to-10 percent range.

CIAB said most employers, despite the cost increases for group medical insurance, are continuing with traditional coverage plans and shifting costs to employees in the form of higher deductibles and co-pays as opposed to limiting options or discontinuing coverage.

High-deductible health plans (HDHP) and Health Savings Accounts (HSA) or Health Reimbursement Accounts (HRA) being promoted by the Bush administration as a way to control medical costs are still slow to catch on, CIAB's survey found.

Three-fourths of the respondents said shifting employees to HDHPs coupled with either an HSA or HRA is being selected by fewer than 30 percent of their clients. But 80 percent of the respondents said they had either sold an HDHP-HSA plan for 2007, or had a client looking at one for 2008.

CIAB reported that one broker respondent from the Midwest said: “The majority of our clients are beginning to increase the deductibles to reduce the overall increases. The HSA plan designs have not provided enough savings to warrant making the change, so they are staying with a higher deductible with office visit and prescription co-pay.”

CIAB quoted another broker as saying the HSA approach is “becoming more viable for the right employer who has the right mindset.”

According to CIAB, there are signs HAS approaches are becoming more attractively priced. When the plans are added, the agents agreed, most are as an option rather than the only choice on the benefits menu.

A broker from the Northeast told CIAB: “More groups are looking at high-deductible plans, but not many are implementing. If they do, it is as an option–not a replacement.”