U.S. Group Health Insurance Rates Continue to Increase: CIAB

Nov. 20, 2008 – WASHINGTON – Employee benefits consultants report rates continued to increase for group medical insurance in the U.S. market at about the same pace as they did six months ago. According to the November Employee Benefits Market Survey by The Council of Insurance Agents & Brokers, small, medium and large employers are struggling to contain rising health care expenses by shifting some costs to employees through higher deductibles and co-pays and increases in employees’ premium share. A few are considering eliminating medical coverage altogether.

“Corporate clients are feeling the pinch as health insurance costs continue to rise and the economic downturn hits their bottom line. Most employers want to provide medical benefits to employees, but many will be forced to shift more costs to them in order to continue to do that,” said Ken A. Crerar, president of The Council.

“Health care reform is high on the agenda for the new Congress and President-elect Obama,” Crerar added. “As these proposals are considered next year, The Council will review the reform proposals to ensure that the employer-based system remains the bedrock of health insurance in this country. We still believe it offers the broadest affordable coverage to the majority of Americans.”

Of benefits consultants responding, 82 percent said prices increased for small accounts, those with 50 or fewer employees, with over half of the increases falling in the 11-20 percent range. For medium accounts — those with 51 to 500 employees — 90 percent said those accounts experienced increases, with 68 percent seeing increases in the range of 6-15 percent.

Three-quarters of the large accounts, those with 501 or more employees, also experienced premium hikes for their group health policies, with 40 percent reporting increases in the 6-15 percent range.

“Employers are starting to move to higher out-of-pocket costs in plan design to mitigate rate increases” one benefits broker said.

Another consultant said, “Deductibles and OOP’s [out-of-pocket] continue to increase. More and more clients are moving to consumer-driven plans or self-insured plans.”

Other cost-cutting options for employers included assessing prescription drug co-pays and limiting out-of-network options. Although dropping medical coverage altogether was seen as the last resort, 91 percent of the benefits consultants said 1-10 percent of their clients were doing just that.

The survey showed growing interest in high deductible health plans (HDHP) coupled with a health reimbursement account (HRA) or health savings account (HSA), although most employers have not yet moved to those plans. It’s important to note that the majority of those who offer high deductible plans offer it as one option, not as a replacement for existing plans. Still, 82 percent of the benefits brokers said they have sold an HDHP-HSA plan in 2008 or their clients are looking at them for 2009.

Small, medium and large accounts were all implementing HSA plans at about the same pace, the consultants said. Most employer contributions to HSA plans ranged between $250-$749.

One broker said his firm was writing more HSA plans, because “premiums in our market have been extremely good.”

Consumer education may be one main reason why HDHP plans haven’t taken hold with more employers.

“Explaining how the coverage works; insuring that employee OOP costs won’t increase and explaining how RX works” is a problem, a broker commented.

Another said, “Educating the population and lack of tools available for the employees/participants to truly act as consumers — price & quality provider data is still very limited.”

The survey also shows an uptick in wellness programs in the workplace. A consultant said ” A major trend seems to be a new focus on wellness as a fully integrated program included in most employer benefit plans.”

The benefits consultants said renewal rates for group life insurance were unchanged or down slightly for all sizes of businesses.

Click here for the full survey charts.

About CIAB

Founded in 1913, The Council is the premier association for commercial insurance and employee benefits intermediaries. The Council represents the leading commercial brokers and agents in the United States and abroad. Council members annually place 80 percent of all commercial property/casualty premiums in the United States and administer billions of dollars in employee benefits accounts. www.ciab.com.