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Behind the Numbers:
The Sting of Premium Increases

Health Insurance CostsIt has often been said that a picture paints a thousand words. If that is true, perhaps three slides of data might reveal the truth we all must grudgingly accept – rising healthcare costs.

Let’s take a quick look.

During the last five years (2010 – 2015), prior to making modifications to their health plans, Iowa employers reported receiving premium increases of 41 percent. During that same period, the overall U.S. consumer price index (CPI) was only nine percent, while U.S. worker’s earnings grew by 10 percent. The reported premium growth in Iowa from 2005 – 2010 was more robust at 52 percent, with an alarming 82 percent from 2000 – 2005. As found most recently, both prior periods clearly outgrew the inflationary and earnings’ growth rates.

Premium Increases PRIOR to Plan Changes

So what was the average premium growth AFTER employers made plan modifications to keep the premiums lower? After increasing deductibles, office & prescription drug co-payments and many other changes that typically shift medical costs to employees, the average increases were more tempered than mentioned above, but still at least double the inflation and earnings rate.

Premium Increases AFTER Design Changes

In the three periods listed above, we can take comfort in knowing that premium increases are about three times less during the most recent five years compared to the 2000 – 2005 period. However, the two graphs don’t show the blunt truth that most Iowa employees are now experiencing, that is, much higher cost-sharing responsibilities for their healthcare purchases – highlighted by rapidly growing health plan deductibles.

From 2000 to 2005, the average single and family deductibles in the most common employer plan (Preferred Provider Organization – PPO) were $410 and $880, respectively. During the following five year period (2005 – 2010), the deductibles increased by 109 percent for single and 104 percent for family ($856 and $1,796 respectively). Then, during the first five years of the Affordable Care Act, which began in 2010, the average single and family deductibles increased by 55 percent and 57 percent, respectively.

Recent evidence suggests that high deductibles suppress the usage of healthcare services for cash-strapped patients. Medical issues, previously ignored, may eventually develop into high-cost care – an unintentional consequence of high deductibles.

Deductible History By Time Periods

Cost shifting through plan design changes remain in vogue and likely will continue well into the future – especially with the anticipation of the Cadillac Tax provision taking effect in 2018. Employers can only do so much to keep their premiums affordable, and when they do, employees will feel the sting from this annual ritual.


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2015 Iowa Employer Benefits Study© is Now Available!

2015-Study-cover-for-blogThe overall summary of the 2015 Iowa Employer Benefits Study© is now available! As we did with last year’s Study, we are providing this summary report through an electronic download only, rather than a printed hard copy.

As mentioned in a previous blog, we had 1,001 Iowa employers participate in this year’s survey, reaching our goal of 1,000 respondents. In addition to the standard benefit questions presented each year, we asked employers about their attitudes toward the healthcare outcomes they hope to achieve, challenges they face when offering health coverage, whether having more insurance companies would keep health premiums lower, and finally, whether hospitals have appropriate incentives to control rising health costs that would ultimately affect the premiums employers pay.

If your organization participated in this year’s survey, we sincerely thank you for sharing your data with us and for your patience while the report was being published. We realize that many employers wish to use the results of this important Study during the fall enrollment process. On October 5th, participants in this Study were sent an email from us with a unique link to gain access to this report (at no cost).

If you have any questions, please don’t hesitate to contact us. Again, we greatly appreciate your interest in this 17th annual study!

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

Hospitals as Insurers? Iowa Employers Evenly Split

Tug-of-WarA tug-of-war ensues between two powerful healthcare players to gain negotiating leverage. On one end are insurance companies, on the other, healthcare providers – specifically hospitals. On the insurance side, one need look no further than the recent acquisitions of Humana by Aetna and Cigna by Anthem. On the opposite end, hospital acquisitions remain high.

From the perspective of each player, all of us will be winners because consolidation will provide the necessary “economies of scale” that will drive down health costs along with the premiums we grudgingly continue to pay. Both sides triumphantly claim similar virtues of consolidation from their own perspective – but not for the other.

Think about it. Aquire a competitor, shed the excess fat of redundant services and become a lean mega-player to fight the battles on behalf of the unsuspecting healthcare ‘consumer’ – people like you and me. Each player strongly proclaims that “bigger is most certainly better” – only, however, if it happens on their respective side of the rope. Should this same quest to ‘grow’ happen on the opposite end of the rope, it suddenly becomes a horrible scourge that will harm our markets – and most certainly harm us ‘common folk’ who must navigate through this endless mess.

Who is right?

In our 2015 Iowa Employer Benefits Study©, organizations were asked two very simple questions regarding the cost of health insurance. The first question was:

Do you believe that having more insurance companies competing for your business will keep health insurance premiums lower?

Apparently, Iowa employers feel differently about having any one dominant carrier negotiating on their behalf. A clear majority of overall respondents (61 percent) indicated that having more insurance companies would keep health premiums lower. Such conventional thinking spans the entire size categories of employers.

Having More Insurance Carriers in Iowa

It seems clear that employers want more competition based on this response. Yet, when asked another question about having a new, potential competitor within the marketplace, employers were not as convinced.

The second survey question asked:

Consider if hospitals became their own insurance company. Do you believe this would give hospitals greater incentive to control health costs and ultimately the premiums they would charge employers?

Employers were evenly split on the idea of hospitals having the appropriate incentives to control costs, with the larger employers being less convinced.

Hospital Incentives to keep Control  Costs

What does this information potentially tell us?

To keep health premiums contained, employers somewhat buy into the idea that competition seems to matter when it comes to having more insurance companies, but they are less inclined to trust that hospitals are equipped to fill that competing role.

Stay tuned as the tug-of-war continues and the rope tightens…

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