Back Button
Menu Button

By 2028, Iowa Employer Health Insurance Family Premiums Could Be…

As we enter the holiday season, I’m somewhat hesitant to share something that could spoil the holiday spirit – our projected health insurance premium 10 years from now. But to put a positive spin on this, especially as we prepare for Thanksgiving day, it is safe to assume the health insurance premiums that we are currently paying will be a ‘bargain’ compared to what we may be paying in 2028.

From our latest 2018 Iowa Employer Benefits Study©, we learned the average annual Iowa family health insurance premium is $17,448. Yes, this is a very inflated amount, especially when we compare it to 10 years earlier in 2008 ($11,520). Yet, this Iowa average is actually a bargain compared to the 2018 Kaiser Family Foundation national average of $19,616! Another positive spin for you!

The five-year average (2014 – 2018) increase for Iowa employer health insurance premiums is 7.7 percent. This figure represents all survey respondents, regardless of employee size and industry. It is important to acknowledge that this number represents the average increase BEFORE employers made adjustments to their health plans to keep the rate increase more manageable. Such adjustments typically include increasing deductibles, copayments and other plan features that require employees (and their dependents) to assume more of the medical costs when seeking healthcare through providers. Either way, the rate increases adversely affect employees’ the take-home pay.

The graph below calculates the average Iowa family premium rate trending forward for the next 10 years (compounded annually at 7.7%) and showing the annual employer and employee contributions (based on the Iowa employer contributing 68 percent of the total cost – another five-year average). One squeamish by-product of inflated health rates not shown on this graph are the plan design alterations that will surely be made by employers to shift costs to employees in order to keep the rates ‘manageable.’ One primary example of this cost-shifting is the family deductible, which was $1,963 in 2008 and is now at $3,900 in 2018 (99 percent increase over 10 years).

The family premium in 2028 could become $36,636! This amount is 110 percent more than today’s average family premium in Iowa.

Also worth noting, the trend line above the premium represents the estimated annual household income (HHI) in Iowa, compounded annually by 1.5% to 2028. The bubble above the $57,947 HHI for 2018 represents the percentage of family premium to HHI. This percentage is projected to almost double by 2028 if we cannot control healthcare costs. In short, over half of our household income (54 percent) could evaporate due to healthcare costs.

As we cast 10 years into the future, it is safe to give ‘thanks’ for what we are paying today in health insurance premiums. This is my best attempt to find some good in something that clearly is not.

Sorry to share this information.  Now, it’s time for the other turkey…

Have a wonderful Thanksgiving!

*DISCLAIMER:
I am NOT predicting that family premiums in Iowa will be $36k by 2028. Rather, based on past behaviors, employers will continue to find ways to alter their plan designs to keep their premiums lower than the initial increases they experience. Because of this, health plans will look considerably different in 10 years than they do today.

To learn more, we invite you to subscribe to our blog.

After 15 Years, Not Much Has Really Changed (Except My Age)

I recently was cleaning out some very old files and came across a document that I wrote 15 years ago. Before tossing it, I decided to read it just one last time.

In 2003, I authored a ‘Commentary’ for the ‘Iowa Commerce’ magazine, an Iowa Association of Business and Industry publication that is no longer in existence. The article was simply titled, “Rising Health Insurance Rates in Iowa.” Little did I know that this title would continue to reflect on the state of our healthcare 15 years later.

In fact, the circumstances then should seem rather archaic compared to today’s challenges, right? See what you think:

Health insurance rates have been increasing dramatically for the last several years in this country. More specifically, employers in Iowa are experiencing higher increases in health insurance costs than employers have been receiving nationwide. With such increases, what are the economic tradeoffs confronting Iowa employers each year?

Our firm, David P. Lind & Associates (DPL&A), recently completed the fifth “Iowa Employer Benefits Study©.” For the last three years, we have noticed a disturbing trend that is plaguing businesses in Iowa – health insurance rates are increasing faster in Iowa than in the rest of the country. For example, our 2001 study showed that health costs increased 17.4 percent in Iowa compared to the Kaiser Foundation Study, which showed an average increase nationally of 11 percent. In 2002, the DPL&A study found that health insurance rates increased by 18.7 percent in Iowa versus 12.7 percent nationally (Kaiser). Finally, in 2003, health insurance rates in Iowa increased by another 18.2 percent. The Kaiser study for 2003 has not been released as of this writing, but other national studies are again proving that Iowa is experiencing higher than average rate increases for health insurance. In fact, over the last five years, our study shows an average increase in health insurance rates of 55 percent in Iowa! Such staggering increases have a profound economic effect on Iowa employers and their ability to make capital improvements.

There are a few key reasons why health insurance rates increase faster in Iowa than nationally. According to Iowa Cares About Medicare, an advocacy group, the state of Iowa has the largest percentage of its population over the age of 85 in this country. In addition, Iowa currently has the fifth highest percentage of people over age 65. People over the age of 65 are eligible for Medicare, the federal health insurance program for the elderly. A report from the Center for Studying Health System Change finds that per person spending on health care increases an average of $40 a year for each year a person ages from 18 to 50. At age 50, spending begins to accelerate rapidly, rising an average of $152 a year for each additional year in age between 50 and 64.

Also, Iowa ranks among the highest states nationally in the percentage of individuals who are overweight, according to a study funded by the U.S. Centers for Disease Control and Prevention. That same study found that people who weigh too much are at an increased risk of heart disease, diabetes, most types of cancer, and other illnesses. It also showed that an obese Medicare recipient costs $1,486 more annually than a Medicare patient at a healthy weight. Unfortunately, Iowa ranks 50th in the country for the rate of Medicare reimbursement that Iowa providers receive when giving care to the elderly. Consequently, Iowa medical providers (hospitals and physicians) must shift costs to the private-payer side to make up for the shortfalls received from the Medicare program.

According to the Iowa Insurance Division, Iowa employers with fully-insured medical plans (self-insured employers excluded), have paid approximately $2.46 billion for medical insurance in the year 2002. With rate increases averaging over 18 percent during the past two years, Iowa employers could possibly pay $2.9 billion in medical insurance premiums for 2003, approximately $443 million more than paid in 2002. Again, this does not include self-insured employers (State of Iowa and many large employers) and self-employed individuals who have private health insurance. In our 2003 study, Iowa employers were asked the hypothetical question: “If your medical insurance premiums remain stable (do not increase) over the next 12 months, how might your organization apply these ‘savings’ elsewhere with the organization?”

Overall, 10.4 percent of employers responded that they would make capital improvements and/or equipment purchases. Smaller employers (less than 250 employees) were more likely than larger employers to make this “investment.” Confronted by this huge economic trade-off of lost capital, it becomes more difficult for employers (both nationally and in Iowa) to reinvest this money to grow their business.

Clearly this trend must abate. We should not spend our time blaming various industries or organizations for this problem, but rather, offer constructive solutions that address healthcare affordability without sacrificing quality of care. A meaningful and ongoing dialogue must develop between all the major “players” within the delivery (and payment) of our healthcare system that would create a new vision and leadership agenda for the future. Why not begin this dialogue in Iowa?

Again, this was written in 2003. Thankfully, the average annual rate increase reported this year by Iowa employers (8.4 percent) is less than half of what was reported 15 years ago (18.2 percent). However, the discussion of affordability continues to plague us today. Since I wrote this piece, the combined rate increase reported by Iowa employers (2004 – 2018) exceeds 140 percent – with no real end in sight.

Except for my age, not much has really changed regarding the escalation of healthcare costs.

To learn more, we invite you to subscribe to our blog.

New 2018 Lindex® Scores Revealed!

New 2018 Lindex® Scores Revealed!We’ve just released the new Lindex®scores based on our 2018 Iowa Employer Benefits Study©. Introduced in 2013, the Lindex is an innovative tool that allows Iowa employers to distill voluminous and complicated benefits data into one relevant number.

An organization’s Lindex score will help Iowa employers:

  • Determine the competitiveness of their benefits package.
  • Attract and retain a high-quality workforce.
  • Decide whether benefit changes are required to keep your employee benefits competitive.

The Lindex is a composite score used as a reference when determining the quality of benefits offered by Iowa organizations. This index is the result of a sophisticated calculation based on the benefits data submitted by 1,001 Iowa organizations from the latest 2018 Iowa Employer Benefits Study©.

Calculated once a year, the Lindex ranges from 0 to 100, with low scores reflecting fewer benefits offered at a higher cost to employees, while higher scores indicate more benefits being offered at a competitive cost.

In 2018, the overall Lindex score for Iowa employers (regardless of employer size and industry) is 76. The overall Lindex score from two years ago was 74. A primary reason for the overall score jumping up two points from 2016 is a result of more small employers offering health and dental coverage.

The Lindex score will vary based on the employer size and industry, which are two determining factors that affect employee benefits. For example, employers with fewer than 10 employees have a Lindex score of 65 (64 in 2016), while employers with 1,000+ employees averaged 86 (89 in 2016).

Below is a summary of the Lindex scores based on organization size:

2018 Lindex by Organization Size

Employers in the retail industry averaged 70 (64 in 2016), while healthcare/social services employers averaged 73 (70 in 2016). Below is a summary of the Lindex scores based on industry:

2018 Lindex by Industry

It’s important to note that an organization with a Lindex score of 62 might appear to be somewhat low when compared to the overall statewide score of 74, but if this score is above the average Lindex score for similar organizations based on size and industry, then it could be considered a competitive score for that organization.

Our 2018 Iowa Employer Benefits Study© and/or benchmarking tool is now available for purchase.

Should you wish to learn more about the Lindex, and how your organization can obtain your own Lindex score, please visit the Frequently Asked Questions (FAQ) section of our website.

To stay abreast of employee benefits and healthcare issues, we invite you to subscribe to our blog.