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.

The Denver Post - - BUSINESS - By Aldo Svaldi

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.

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