Group health insurance plan rates continue rising

Filed under: Health Care |

Employers of all sizes continue to see rising costs for group medical coverage account renewals, although the increases for the largest accounts are lower than for small and medium accounts, according to the 2006 Employee Benefits Market Survey conducted by the Council of Insurance Agents and Brokers.

Brokers reported that 50 percent of small accounts (50 or fewer employees), 42 percent of medium accounts (51 to 500 employees) and 19 percent of large accounts (501 or more employees) experienced rate increases of 11 percent to 15 percent. In contrast, 41 percent of large accounts, 34 percent of medium accounts and 16 percent of small accounts saw rate increases of 6 percent to 10 percent.

An additional 16 percent of large accounts had increases of 1 percent to 5 percent, compared to only 2 percent of small accounts and 5 percent of medium accounts.

The council represents domestic and international commercial insurance agents and brokers, and conducts a benefit market survey twice a year to track trends in the marketplace.

The fall survey found that while a small percentage of employers are discontinuing group medical coverage, the trend to control costs continues — with a majority of employers increasing the employee share of premium costs, assessing prescription drug co-pays and increasing deductible co-pays.

Employers are also exploring options for health savings accounts. Seventy percent of respondents reported that they had sold an HSA plan for either 2006 or 2007. Brokers reported similar numbers of small, medium and large accounts implementing the plans.

Of the employers who selected an HSA account, respondents reported that 68 percent use it as a plan option, 10 percent to replace an existing plan and 22 percent for both.

Twenty-eight percent of employer contributions to HSAs are between $250 and $499. More than 20 percent are $500 to $749 and 16 percent are $750 to $1,000.

Premium rates for group life benefits were unchanged during the past six months for 47 percent of small accounts, 48 percent of medium accounts and 41 percent of large accounts. Increases of 1 percent to 5 percent were reported for 11 percent of small accounts, 15 percent of medium accounts and 7 percent of large accounts.

Similarly, decreases of 1 percent to 5 percent were reported for 11 percent of small accounts, 17 percent of medium accounts and 17 percent of large accounts.

Tax subsidies for health care exceed $200 billion

Total federal and state tax subsidies for employer-sponsored health care coverage for active workers will exceed $200 billion in 2006, an inflation-adjusted increase of more than 150 percent since 1987, according to a study sponsored by the Health and Human Services’ Agency for Healthcare Research and Quality.

The health insurance premiums that employers contribute, as well as an increasing share of workers’ premium contributions, are exempt from federal and state income taxes, as well as from Medicare and Social Security taxes. The goal of these subsidies is to make job-related health insurance more available to workers.

AHRQ’s Tomas M. Selden and Bradley M. Gray of the CNA Corp., a nonprofit research institute, estimate that in 2006, the federal and Social Security payroll tax components of the overall employment health insurance subsidy will total $111.9 billion and $73.3 billion, respectively, while the exemption from the state income taxation will total $23.4 billion.

They also estimate that nearly 80 percent of the overall tax subsidy will go to private establishments and their workers, 17 percent will be for state and local public establishments and the remaining 3 percent will be for coverage provided to federal employees.

Other projections include:

  • The average tax subsidy for each worker who is covered by employer-sponsored health insurance, regardless of type of employer, will be $2,778.
  • The average tax subsidy per worker enrolled in a single-coverage plan will be $1,573, compared to $3,825 for a family-coverage plan.
  • The average subsidy per covered federal worker will be $608 more than average, primarily because federal employees are more likely than workers in general to select family coverage.
  • The average subsidy per worker in companies with 1,000 or more employees will be $1,886, compared with $770 per worker in firms with fewer than 10 employees.
  • The average subsidy per covered worker in establishments where more than half the employees earn more than $23.07 an hour will be $3,283, compared to $2,268 per covered worker in establishments in which the majority of employees earn less than $10.43 an hour.

The industries with the lowest per-worker subsidies include agriculture, fisheries and forestry, retail trade and construction, while those with the highest average subsidy include financial services, utilities and transportation, real estate, and mining and manufacturing.

The states with the highest average per-worker subsidies tend to be in the Northeast, East, North Central, South Atlantic and East South Central areas of the country, while those with the lowest are found mostly in West South Central, Mountain and Pacific Coast areas.

Researchers based their projections on data from AHRQ’s medical expenditure panel survey which determines how Americans use and pay for health care, including health care insurance.

The survey is published in the November-December issue of Health Affairs.

Amy Gillentine covers health care for the Colorado Springs Business Journal.