Two consulting firms are indicating health plan rate increases will be between 8.4% and 9.9% in 2006. While this is somewhat lower than increases in recent years, the impact will be felt by both employers and employees, who can expect to pay more for their share of the premium than they did this year. And, the premium increases do not reflect the increased costs borne by employees due to higher deductibles and co-pays.
According to Hewitt, employees will receive an average wage increase of 3.6%; for those making $40,000 annually, 23% of that increase will go to pay their increased premiums. On average, employees will be paying $1,612 towards their health insurance costs. Out-of-pocket costs also will increase as deductibles and co-pays rise, making the average employee’s total expenditures in 2006 a record high $3,136. This is 12% higher than 2005.
Interestingly, PPOs will see the lowest percentage increase amongst plan types. According to Insurance Journal’s report on the Hewitt Study;
“On average, Hewitt forecasts that companies will experience 2006 cost increases of 9.5 percent for preferred provider organizations (PPOs), 10 percent for health maintenance organization plans (HMOs), and 10.5 percent for both traditional indemnity and point-of-service (POS) plans.
That means, from 2005 to 2006, the average cost per person for major companies will increase from $7,048 to $7,752 for HMOs; $7,374 to $8,075 for PPOs; $7,322 to $8,091 for indemnity plans; and $7,849 to $8,673 for POS plans.”
Hewitt also noted that many of the companies they are working with that have implemented consumer-directed health plans have seen flat renewals or even declines.
While this sounds great, remember that many of these plans include an increase in the deductible of from $1000 to $5000. Clearly, benefit design can and does have a major impact on renewal rates; it has for fifty years and the onset of these so-called “innovative” plans simply reinforces that fact.
A survey by Milliman and Robertson indicates that many health plans and insurers are entering the CDHP market; in their annual survey, 93% of respondents who answered the questions regarding CDHPs (not all of the survey respondents did) said they plan to offer an HSA or HRA (health care reimbursement) account program coupled with a high deductible insurance plan.
While that sounds great, only 2.5% of 2005 commercial health premiums are for CDHP programs; respondents expect this to be over 5% in 2006.
What does this mean for you?
Higher premiums, a relatively smaller paycheck, and no help in sight.
Oct
12
