Costs weigh on employers’ health plans
Colorado firms say they’ll take measures to limit hikes – expected to be 7.6 percent – to 4.7 percent.
Colorado employers expect health benefit costs will jump 7.6 percent on average next year, according to an annual survey from the Lockton Mountain West Benefit Group. But they say they’ll take measures to limit increases to 4.7 percent.
Lockton, a global commercial insurance brokerage, surveyed 280 Colorado employers last month about the health benefits inflation they face and how they plan to respond.
It’s a vital issue, given that more than half of state residents are covered under employer-sponsored plans.
“Colorado has one of the lowest unemployment rates in the country, and benefits have become one of the differentiators in how employers can recruit and retain workers,” said Leo Tokar, an executive vice president with Lockton Mountain West and the author of the survey.
The increase for 2017 is slightly below the 8 percent pace reported for both 2015 and 2016, and much less than the annual in-
creases of 11.8 percent to 18 percent reported between 2004 and 2011, according to earlier Lockton surveys.
Still, the 2017 increase is three times the local inflation rate and the region’s average pay increase.
Because of Colorado’s tight labor market, employers are challenged in how they pass on higher benefits costs. Last year, employers said they whittled an 8 percent increase to a 4.4 percent increase; they plan to absorb a larger share of the 2017 increase.
Faced with higher costs, employers can reduce benefits or require employees to shoulder a larger share of premium increases — at the risk of increasing defections to rival companies that provide more generous benefits.
Changing carriers is another cost-cutting option. At larger companies, so is self-funding, or taking on more of the financial risk of providing coverage.
About 48 percent of employers are self-funding rather than handing everything over to an insurance carrier.
“More employers are looking at managing costs as a strategic multi-year process,” Tokar said. They are managing their health plans like other parts of the business and finding ways to save.
Another popular premium-lowering strategy is to increase reliance on highdeductible health plans. Those plans, which 57 percent of the Colorado employers surveyed report providing, offer lower premiums but require employees to cover more out-ofpocket costs when they seek care.
Tokar said Colorado companies are not dropping health insurance and leaving employees to find their own coverage on exchanges created under the Affordable Care Act.
Coloradans who obtain coverage through the health care exchange may face 20 percent premium hikes next year — and up to 40 percent hikes in some rural area — although tax subsidies will cover the higher costs for some people.
It remains to be seen what happens to the Affordable Care Act, which presidentelect Donald Trump has pledged to reform or overturn, Tokar noted. Employers welcome relief from the burdensome reporting requirements, but they don’t want a return of doubledigit premium increases experienced in the last decade.