CIAB Survey Shows Group Health Rates Rising Amid Uncertainty Over Economy, Health Care Reform Efforts

WASHINGTON, D.C., Dec. 16, 2009 – As the health care reform debate continues in Congress, employee benefits consultants report increases in rates for group medical insurance in the U.S. market. According to the November Employee Benefits Market Survey by The Council of Insurance Agents & Brokers, small, medium and large employers continue to experience group medical coverage rate increases and are shifting some costs to employees through higher deductibles and co-pays and increased employee shares of premium costs.

“The economy is impacting carrier behavior according to our members,” said Council President Ken A. Crerar. “Several members commented that there is less underwriting flexibility than in recent years. I also think the uncertainty about health care reform is affecting group health carriers, who want to protect their position in the marketplace. Brokers also are reporting that utilization of services is high and may be linked to employee fear of losing jobs and health care benefits.”

Of the benefits consultants responding, 91 percent said prices increased for small accounts, those with 50 or fewer employees, with more than half the increases falling in the 11-20 percent range. For medium accounts — those with 51 to 500 employees — 94 percent said those accounts experienced increases, with 57 percent seeing increases in the range of 6-15 percent.

Group health premium hikes also were reported among large accounts — those with 501 or more employees. Of those, 58 percent saw increases in the 6-15 percent range, with 38 percent were in the 6-10 percent range and 20 percent in the 11-15 percent range.

In survey comments, many brokers cited trend number increases of 2-4 percent over the last year for the exact same groups. One consultant from the Northeast commented, “Carriers have increased trend assumption and have become less flexible on negotiations and employers entertaining more high deductible plan options.”

“The trend factors are up 3-4% and loss ratios seem to be running higher than normal — likely the result of lower headcounts (layoffs) applied against increased claim activity,” one benefits broker said.

Another consultant from the Northeast said, “Small group accounts are receiving excessive rate increases. The carriers aren’t negotiating off the renewals as they have in the past.”

Employers are also looking to employees to shoulder a higher percentage of premium costs, with more than 50 percent of respondents saying that over half of their clients have chosen this option as well as the option to have higher deductibles and co-pays. However, employers are not looking to drop health coverage completely, with 78 percent of respondents saying that only 1-10 percent of their clients are considering that option.

One broker said, “Carriers are more aggressive in putting additional dollars to incentivize clients to move. Deductibles are rising at a faster rate than benchmarking supports. There is more cost-shifting to employees and limited provider networks are becoming very attractive.”

The survey also revealed concerns that stem from the health care reform. Eighty-two percent said they are very concerned the health care reform will negatively impact group benefit revenue, and 80 percent said they feel a public plan open to all will have the greatest negative impact on their business.

The benefits consultants also said that group life insurance renewal rates were unchanged or down slightly for all size accounts.

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.