Large Employers Finding Ways to Manage Healthcare Costs
Large Employers Finding Ways to Manage Healthcare Costs: The Affordable Care Act (ACA) has introduced sweeping changes that impact everything from medical plan design and eligibility determination to employee communications, compliance reporting, and tax filings. However, large U.S. employers have been fairly effective in managing overall healthcare costs despite concerns over ACA mandates, according to the 2015 ADP Annual Health Benefits Report from the ADP Research Institute.
Based on five years of actual, anonymous and aggregated health benefits data from U.S.-based companies with 1,000 or more employees going back to 2011, the report provides employers with benchmarks to gauge the effectiveness of their current health benefits strategies and to help plan for changes on the horizon. The study highlights health benefits trends over time. Data from 2013 and 2015 was closely analyzed-two years marking the points before and after key ACA provisions went into effect-and revealed how employers may be responding to healthcare reform.
"While many large employers have been struggling with ACA compliance and administrative requirements, employee participation and premium contribution rates, as well as overall medical premium cost trends appear to be fairly stable," said Christopher Ryan, vice president, Strategic Advisory Services at ADP. "This stability alleviates some of the concerns expressed early on by policy makers regarding the potential for rapidly rising medical premiums due to new plan design and coverage requirements enacted under the ACA."
Key findings of the 2015 ADP Annual Health Benefits Report include:
Premiums rising at a slower rate
Since 2011, total premiums (including the employer and employee portions) increased by 9.4%, or about 2% every year. From 2014 to 2015, total premiums increased 2.6%, which is relatively modest when compared to the previous decade. This could be partially due to more employers offering high-deductible plans with higher co-pays and implementing flexible spending accounts and consumer-directed health plans.
Eligibility rates increasing, but participation rates steady
Eligibility rates increased from 2013 as the economy improved, the labor market became more competitive and employers began to offer coverage to more workers to ensure compliance with the ACA Employer Shared Responsibility mandate. Although eligibility has increased, the percentage of eligible employees electing coverage decreased, possibly indicating that many employees have alternate forms of coverage. Due to the rise in eligibility and lower election rates, overall participation rates remained relatively unchanged.
While eligibility rose for the under-26 age group, the percent of eligible employees in that group who elected insurance through their employers decreased considerably, resulting in lower participation rates over time. This trend may be a reflection of the ACA's extended dependent coverage provision allowing those under 26 to remain on their parents' plans. Lower incomes and coverage from school or Marketplace/Exchange plans may also have contributed to the lower election rates for this group.
Premiums vary by industry, age
This study analyzed the average monthly premiums in five selected industry groupings: Education and Health Services; Financial Activities; Manufacturing; Professional and Business Services; and Trade, Transportation and Utilities. Over the period studied, average monthly premiums increased in all five selected industries, but at varying rates. Industries with higher medical premiums, such as Professional Business Services, with total monthly premiums of $911 in 2015, also experienced the lowest premium increases at 5.8% over a four year period. Conversely, Education and Health Services had the lowest monthly premium in 2015, at $792, but incurred premium increases of over 10% during the same time period. For the period studied, the largest jump occurred in Trade, Transportation and Utilities, which had an 11.4% increase in premiums. Because the ACA imposes an upper boundary on premium costs through an excise tax starting in 2018, as well as lower boundaries for affordability and minimum essential coverage, variance in medical costs across industry groups may shrink over time.
Health plan premiums rose for all age groups. The greatest increase during this period was for the under-26 age group. However, this group had the lowest monthly premium overall, which was $552 in 2015. The highest monthly premium was in the 40-to-49 age group at $991, followed by the 50-to-59 age group at $936. Those who are ages 40 to 59 are likely to have the most dependents (including adult children staying on a parent's policy until age 26), which could explain their higher monthly premiums.
"Through our unique access to actual, anonymous employee data, the ADP Research Institute can shed light on key trends related to healthcare that employers can use to help create effective benefits and workforce management strategies in 2015 and beyond," said Ahu Yildirmaz, vice president and head of the ADP Research Institute. "As employers continue to adapt to the evolving healthcare landscape, they can track how they compare with the broader workforce analyzed in this study."
"Taken together, the results of the report suggest that large employers have been effective in managing overall health costs despite concerns over ACA mandated changes, added Ryan. "Companies may be struggling with ACA compliance and reporting requirements, but 5 years in, this study reveals the underlying cost trend for large employers remains modest."
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