The face of American healthcare in 2012 is changing. Various reforms have already been implemented and others are pending. Current political debates, opposition movements and pending court cases regarding health-care reform all point to an uncertain 2012. Despite the changes overshadowing the future of the US healthcare market, employers have no choice but to continue managing these costs for their companies. Employers and human resources staff that are well-informed about health insurance trends will be better suited to determine the policies that will be of greatest benefit to their companies.
Projected Health Care Costs
According to the Aon Hewitt 2011 Health Care Trend survey, national medical care costs are projected to increase by 10% in 2012. In California, employers may have to shell out an additional 12% for healthcare costs, according to the California Health Care Foundation (CHCF) annual survey of December 2011. Healthcare inflation is increasing at levels of 3 or 4 times the degree of national inflation. The expectation is that these trends will continue, creating concern for employers as well as employees struggling to afford medical coverage.
According to recent studies, rising insurance premiums may drive many employers to discontinue offering health coverage to their employees, opting to pay a penalty instead. In June 20122, the McKinsey Survey contacted 1300 employers on the CEO or CFO level. The survey found that 30% of all employers were likely to drop their health care plans; of those employers with a “high awareness” of the details of health care reform that increased to 50%. Ostensibly, seemingly high fines of $2000-3000 would be enough of a deterrent to prevent employers from discontinuing coverage for employees. However, in truth, such penalties represent only about one quarter of the health insurance costs these employers would have to pay.
California Trends with Co-Pays and Deductibles
According to the CHCF, higher co-pays and deductibles are also on the rise; a trend that is likely to continue. Some interesting statistics pertaining to California health insurance programs highlight this trend as employers look for creative way to reduce insurance premiums.
- 76% of California HMO plans and 65% of PPO plans have copays of $10-$20
- Less than 1% of all plans offer $5 copays, but over 25% of these plans obligate copays of greater than $20.
- 25% of California’s employer sponsored plans are high deductible plans of $1000 or more.
The bottom line is that through elevated deductibles and greater out-of-pocket expenses employers are passing costs on to employees.
Health insurance for small business is looking to undergo significant changes in 2012. If employers are serious about reducing health costs and shielding their companies from drastic changes in the coming year, they should be sure to review and implement creative health insurance plans for their employees.