Midsize firms to see sharp rise in health care rates

Health plan premium increases for small and midsize employers may leap back into the double-digits next year following an 8.6% jump this year, according to a national survey conducted by United Benefit Advisors L.L.C.

"There is little confidence the premium increases will continue to decline, with anticipated increases next year running at 11.6%, and consumer-driven plans expected to increase slightly less at 11.1%," reports the survey, released last week, of 9,603 mostly small and midsize U.S. employers who collectively provide coverage to approximately 3.65 million lives.

The survey was conducted in the second quarter of 2006, making it necessary for many of the participating employers to project rates of increase rather than report their actual renewal premiums, said David J. LoCascio, co-founder of Indianapolis-based UBA, a consortium of more than 140 benefit advisory firms located across the country.

The survey paints a grimmer picture for small and midsize employers than that of another survey of mostly large employers released last week by Mercer Health & Benefits L.L.C. Mercer survey respondents projected increases averaging just 5.6% in 2007-one of the smallest increases in years. However, the lower increases in the Mercer survey were attributed to plan design changes, such as raising deductibles. Otherwise, costs for large employers would increase by about 9% in 2007, the survey found.

The UBA survey found the average annual health plan cost per employee in 2006 was $6,629, with an average employee contribution of $2,031 and average employer cost of $4,592. Health maintenance organizations and consumer-driven health plans had 10% lower costs per employee than the average of all plans, while point of service and indemnity plans has nearly 9% and 21% higher annual costs, respectively, per employee than the average plan.

PPOs continue to dominate the employer-sponsored health plan market, with 61% of employers offering them and 63.3% of employees enrolled in them, the UBA survey reported. By contrast, traditional indemnity plans have nearly disappeared, with only 0.9% of employers offering them and only 1.4% of employees enrolled in them, according to the survey.

The newest entree to the market, the consumer-driven health plan, appears to be gaining a foothold, UBA reports. Such plans, usually offered in conjunction with either an employer-funded health reimbursement arrangement or a health savings account-which can be funded by either employers, employees or both-are now offered by 5.9% of employers vs. 2.6% last year, with 3.4% of all covered employees enrolled in such plans, also up from 1.9% last year.

The survey found that the average employer contribution to an HRA was $1,033 for single coverage and $1,965 for family coverage. The average employer contribution to an HSA was $938 for single coverage and $1,533 for family coverage.

Copies of the complete survey report are available for $900 for UBA members and $1,800 for nonmembers. For more information, visit www.benefits.com.