| Council of Insurance Agents and Brokers' Employee Benefits Market Survey
The rate of change in group medical premiums has for all intensive
purposes remained unchanged over the last four quarters. Once again,
employers with 50 employees or fewer sustained the highest increases on
account renewals while large employers experienced the smallest.
According to the Fall 2008 Employee Benefits Market Survey conducted by
The Council of Insurance Agents & Brokers (CIAB), 82% of respondent
brokers reported an increase in small group accounts (50 or fewer lives)
with greater than 50% of increases falling in the 11% – 20% range.
Results were similar for medium accounts (51 to 500 lives) as 90% of
respondent brokers reported rate increases with 68% seeing increases in
the 6% – 15% range. Large accounts (501 of greater lives) were also not
immune to premium rate increases as 75% of respondent brokers reported
seeing rate increases.
On the surface it would appear that the group medical premium rate delta
lines as reflected on the graph below have leveled off over the past
couple of quarters with period over period rate changes being
consistent. While this is true, it is important to note that employers
of all sizes continue to shift costs to employees by means of higher
deductibles and co-pays, by reducing the overall levels of benefits
provided and by increasing the employee share of monthly base premium
costs. On an apples-to-apples basis, from the employee perspective,
benefit obtained per dollar of expenditure has noticeably decreased. As
one respondent broker stated, "employers are starting to move to higher
out-of-pocket costs in plan design to mitigate rate increases". Ken A.
Crerar, President of CIAB, is quoted in the most recent Employee
Benefits Market Survey saying, "most employers want to provide medical
benefits to employees, but many will be forced to shift costs to them in
order to continue to do that". The survey went further by stating
"although dropping medical coverage altogether was seen as the last
resort, 91% of [respondent] consultants said 1% – 10% of their clients
were doing just that".
Brokers responding to the survey also reported an increased use of high
deductible health plans (HDHP) coupled with health reimbursement
accounts (HRA) or health savings accounts (HSA), as well as increased
prescription drug co-pays, as means of curbing the impact of rising
premium costs on employers.
The following chart illustrates annualized rate changes for the various
employer group categories.
Figure 1 (click to enlarge)
Benefits and tradeoffs of HDHPs and HRAs / HSAs remain fairly cumbersome
for the average employee to fully comprehend while employers continue to
struggle with the cost / benefit analysis of implementing HDHPs as the
primary option for employees. One respondent broker commented,
"explaining how the coverage works; insuring that employee OOP
[out-of-pocket] costs won't increase and explaining how Rx works" is a
problem. Barring a major shift in factors outside the medical insurance
industry, there remains little reason for insurers to collectively allow
for industry wide rate reductions. Employer sponsored wellness
strategies that encourage employees to get and/or stay fit and maintain
a healthy lifestyle continue be evermore prevent.
Although healthcare reform is high on the agenda of President-elect
Obama, health insurance premium rate changes are expected to reflect
premium increases in the low to mid teens throughout the remainder of
2008 and throughout 2009 while the level of benefits achieved per
premium dollar is expected to steadily decrease. Decreasing headcounts
will have a negative impact on retail brokers' top lines over the next
twelve to eighteen months but rate increases are expected to continue
indefinitely.
As reported by the CIAB survey, group life rates, as illustrated below,
experienced a slight tilt downward during the second half of 2008.
Figure 2 (click to enlarge)
Group life insurance rate changes are expected to be mixed throughout
the remainder of 2008 and well into 2009 with relatively small period
over period upticks and downticks.
Source:
The Council of Insurance Agents & Brokers Employee Benefits Market Survey
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