Group Medical Costs Continue Sharp Increase

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Group Medical Costs

The cost of providing group health benefits to employees continued to increase sharply during the past six months, with the vast majority of employers -- regardless of their business size -- paying significantly more for account renewals than in the fall of 2006.

According to agents and brokers responding to the spring Employee Benefits Market Survey by The Council of Insurance Agents & Brokers, the cost of group medical care increased for 81 percent of their small accounts (50 or fewer employees), with 54 percent of renewals being between 11 and 15 percent higher. Similarly, 90 percent of the agents said their medium-sized clients experienced increases in group medical costs, with 47 percent falling in the 11 to 15 percent range.

Three-quarters of respondents said their large clients (those with 501 or more employees) paid more for their group medical plans, with the largest number of increases (43 percent) in the 6-10 percent range.

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The Council represents the nation's leading domestic and international insurance agents and brokers who annually place more than 80 percent of the commercial property/casualty premiums in the United States and administer billions of dollars in employee benefit accounts.

Despite the cost increases for group medical insurance, however, most employers are continuing with traditional coverage plans and shifting costs to employees in the form of higher deductibles and co-pays as opposed to limiting options or discontinuing coverage. The high-deductible health plans (HDHP) and Health Savings Accounts (HSA) or Health Reimbursement Accounts (HRA) being promoted by the Bush administration as a way to control medical costs are still slow to catch on.

Three-fourths of the respondents said shifting employees to HDHPs coupled with either an HSA or HRA is being selected by fewer than 30 percent of their clients. But 80 percent of the respondents said they had either sold an HDHP- HSA plan for 2007 or had a client looking at one for 2008.

"The majority of our clients are beginning to increase the deductibles to reduce the overall increases," one broker from the Midwest said. "The HSA plan designs have not provided enough savings to warrant making the change, so they are staying with a higher deductible with office visit and prescription co-pay."

Still, the HSA approach is "becoming more viable for the right employer who has the right mindset," one broker observed, and there are signs those approaches are becoming more attractively priced. When the plans are added, the agents agreed, most are as an option rather than the only choice on the benefits menu.

"More groups are looking at high deductible plans, but not many are implementing. If they do, it is as an option -- not a replacement," said a broker from the Northeast.

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