Employers are tweaking benefits to control costs

shrinking-costsA new report from Milliman, the actuarial firm, shows employers’ health care costs rose only 5.4 percent since last year. The report also showed how employers are changing their employee benefit plans to control costs.

Here are a few highlights from the 2014 Milliman Medical Index (MMI) report:

  • The 5.4 percent rate of growth from last year to this year was the lowest annual change since Milliman produced its first MMI in 2002 and is down from 6.3 percent last year. The 5.4 percent is still higher than the rate of growth in the consumer price index (CPI).
  • Employers will spend $23,215 this year for health insurance for a typical American family of four, the report showed. Since 2004, the amount employers spend on health care per family has more than doubled, from $11,192 to $23,215.
  • This year, employers will pay $13,520 (or 58 percent) of total health care costs, and employees will pay the rest: $5,908 (or 26 percent) for insurance coverage and $3,787 (16 percent) in out-of-pocket costs.
  • Since 2007, the average employers’ costs have risen by 52 percent (about 6 percent annually) but the cost to families has risen by 73 percent (about 8 percent per year), Milliman said.
  • The Affordable Care Act has had little effect on the cost of employer-sponsored care for families, Milliman reported. Rather, most reforms under the ACA have affected the individual and small-group markets.

Writing for The Washington Post Wonkblog, Jason Millman pointed out a fascinating trend to watch: “The actuarial firm cites Obamacare’s impending excise tax on ‘Cadillac’ plans – valued at at least $27,500 for family coverage starting in 2018 – as a factor that will force employers to scale back health plans.” The ACA calls for a new excise tax, called the Cadillac tax, on high-cost health plans, a levy employers will want to avoid if they can. Hence, the idea that they may scale back coverage.

Download the full report (PDF) with more discussion of the trends affecting health care costs and how employers and health plans are shifting costs.

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