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Study Factoids Worth Noting…

David P. Lind BenchmarkEvery now and then I will provide a few slides of study information that demonstrate a quick trend on benefits offered by Iowa employers. Each slide requires little if any commentary from me, as it will allow you to draw your own conclusions about the potential consequences within the Iowa employment community.

The first slide illustrates the average contributions paid by employees with single and family health coverage from 1999 to 2011.

David P. Lind Benchmark

The next two slides provide a great example of how consistent the employee contributions for both single and family coverage have been since the year 2000.

 David P. Lind Benchmark

David P. Lind Benchmark

 

 

 

 

 

 

A ‘Perfect’ Storm Brewing

David P. Lind BenchmarkAs mentioned in my July 18 blog, our annual Iowa Employer Benefit Studies© have revealed that if health insurance trends continue in Iowa (based on the average five year history of rate adjustments), employers could be paying an average annual single and family premium of $13,295 and $35,000, respectively, by the year 2021. We all know this is clearly unsustainable.

Based on these numbers, the “Perfect Storm” is brewing during the next five years in Iowa – and beyond.

Here’s why. The Affordable Care Act (ACA) has an ominous provision surfacing in 2018 that will greatly impact the cost of health insurance offered by employers in Iowa and around the country. Known as the “Cadillac” tax, employer health plans that reach a pre-determined threshold of annual premiums in 2018 and beyond ($10,200 for single and $27,500 for family) will be charged an excise tax of 40 percent for any premium over these amounts. From our survey of Iowa employers in 2011, most employers don’t think they will be affected by this provision (see below). 

David P. Lind Benchmark

So is it possible for Iowa employers to have premiums this high in about five years?

Absolutely!

As illustrated below, the average Iowa employer family premium in 2018/2019 could be hovering around the threshold amount of $27,500. This means about half of Iowa employers will be averaging premiums above this amount and paying the excise tax, while the other half are below the threshold amounts. (Although not illustrated here, the projected single premium in Iowa will also average around the single threshold of $10,200).

David P. Lind Benchmark

Clearly, Iowa employers must make strategic decisions today and in the next few years to prevent their plans from being subjected to this “Cadillac” tax. The excise tax will only accelerate the unsustainability of employer-based premiums.

Wellness – Size Seems to Matter

David P. Lind BenchmarkSize really does matter – it appears.

For many years, we have asked thousands of Iowa employers whether they offer some type of wellness initiative, and if so, what components do they include in their program. From our 2011 Study, we do know that Iowa employers offer the following wellness initiatives:

  • 44 percent offer Medical Information to their employees through a website, newsletter, etc.
  • 26 percent of Health Screening Programs
  • 23 percent offer Smoking Cessation Programs
  • 22 percent offer Chronic Disease Management Programs
  • 21 percent offer Health Risk Assessment Programs
  • 21 percent offer Health Club discount/reimbursement Programs
  • 18 percent offer Weight Control Programs

When we look a bit closer at these numbers, we see a very consistent theme (found in all past studies) – smaller employers are clearly less likely to embrace wellness initiatives (see below).

 David P. Lind Benchmark

A few primary reasons that smaller employers do not offer wellness initiatives relates to cost and time. Smaller employers have fewer resources than their larger counterparts, and therefore desire to spend their time and money on keeping their business, well, in business! For the typical small Iowa employer, focusing on the basics of their business is paramount to surviving in these harsh economic times.

Due to sheer cost, offering health insurance might be considered a ‘necessary evil’. But offering health coverage allows the employer to compete with other employers for qualified workforce talent. From our studies, we know that smaller employers are less likely to offer health insurance to their employees. Compared to larger Iowa employers, small employers tend to receive higher rate adjustments to their health plans, year after year. From this, small employers are forced to drastically change plan designs that shift additional costs to employees through higher deductibles and copayments. When employees have to pay more through higher cost shifting, many may forgo (or delay) seeking health care services altogether. This unintended consequence can be detrimental to the long term interests of small employers.

It may be time for smaller employers to reconsider offering sensible wellness initiatives – perhaps not to expect immediate relief in health insurance premiums, but to promote a healthier, more productive workforce. Size should not really matter when it comes to having a healthy workforce.