Employer-Funded Individual Health Insurance

Transcription

1 Employer-Funded Individual Health Insurance ANNUAL REPORT 2016

2 1 EXECUTIVE SUMMARY This 2016 Annual Report is intended to provide a detailed, nationwide profile of how employers and employees are using employer-funded individual health insurance as an employee benefit today. The findings are based on a sample of 2,200 employers and 10,500 participants using a Zane Benefits* defined contribution health benefit solution during the 2015 calendar year. KEY FINDINGS AND CONCLUSIONS Nationally, the average employer-funded health benefit allowance offered by employers is $426 per month, per employee. This average includes all states and family sizes. The average employee utilization amount of the employerprovided health benefit allowance, among all states and family sizes, is $380 per month, per employee (an 89% utilization rate). As such, the actual employer contribution toward health benefits averages $380 per month. Compared with offering traditional group health insurance coverage, employers using a defined contribution solution save an average of 57% on comparable, comprehensive health benefits. This gives small business employers the ability to afford and, in many cases, improve their employee benefits offering. * Note: Zane Benefits became PeopleKeep in 2017.

3 DEFINITIONS 2 Allowance: The real dollar benefit offered to employees, on a monthly or annual basis. Amounts may vary by employee class or family size, as determined by the employer, and represent a fixed, annual maximum liability.* If employees do not utilize their full allowance during the plan year, unused funds stay with the employer. Reimbursement: A real dollar amount distributed to the employee for approved and substantiated healthcare expenses, incuding health insurance premiums. Utilization Rate: The portion of an allowance used by employees during a given plan year, expressed as a percentage of the total allowance. For example, if an employee receives an allowance of $3,600 per year and her approved premium is $3,120 per year, the utilization rate for this employee is $3,120 divided by $3,600, for a utilization rate of 87%. *As required by law, reimbursement of certain preventive service expenses may not be limited by allowances. TRENDS IN DEFINED CONTRIBUTION USER PROFILE WHO IS USING EMPLOYER-FUNDED INDIVIDUAL HEALTH INSURANCE SOLUTIONS? Defined contribution and individual health insurance solutions are being adopted by firms nationwide as a preferred alternative to traditional employer health benefits. This consumer-friendly solution is being explored by employers of all sizes, and in all regions and industries. However, the Zane Benefits data identifies clear and interesting trends. Employers using a defined contribution solution are predominately small employers those with 1-49 employees. The average number of eligible employees enrolled is nine (9). The most prominent industries represented in the study are healthcare (16% of employers), manufacturing (13%), non-profit organizations (11%), consulting firms (8%), and construction (8%). Employers studied are spread out across the nation with 11% from the East, 21% from the Midwest, 38% from the South, and 30% from the West.

4 3 Defined Contribution Employer Profile 1-49 Employees (average of 9) NATIONAL SAMPLE East 11% Midwest 21% South 38% West 30% MAJOR INDUSTRY REPRESENTATION Healthcare 16% Manufacturing 13% Non-Profit 11% Consulting 8% Construction 8% EMPLOYER-FUNDED ALLOWANCES With defined contribution health benefit plans, allowances are set by the employer, so there are no minimum or maximum contribution requirements. This not only allows employers to control costs, but gives them the ability to adjust allowances according to the needs and expectations of each employee. Nationwide, the average allowance offered to employees is currently $426 per month. Allowance averages also vary by family status, region and state. Average Employer Allowance by Family Size $600 $500 $400 $300 $200 $100 $290 $367 $463 $581 SINGLE SINGLE + CHILDREN MARRIED MARRIED + CHILDREN Average Employer Allowance By Region $600 $500 $400 $300 $200 $415 $441 $383 $407 $100 MIDWEST NORTHEAST SOUTH WEST

5 Average Employer Allowance by State 4 $0 $100 $200 $300 $400 $500 $600 $700 $800 Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisianna Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming $0 $100 $200 $300 $400 $500 $600 $700 $800

6 5 UTILIZATION AND COST EFFICIENCY Once established, an employer-provided allowance represents the maximum, annual expense liability for the firm s health benefit. However, the actual expense is based on utilization of the allowances by participants. For example, if an employee has an allowance of $400 per month and her approved premium is $300 per month, she is reimbursed $300 per month (a 75% utilization rate). Conversely, If the same employee has an allowance of $400 per month and her approved premium is $450 per month, she is reimbursed $400 per month ( utilization rate). In the first example, the $100 unused dollars remain with the company, reducing the overall cost for providing health benefits to this employee. In the second example, the employee uses her entire allowance, and the remaining $50 is her monthly responsibility. Nationally, the average approved amount ( reimbursement amount ) among all states including all family sizes is $380 an 89% utilization rate. So, considering this average, an employer with ten employees has an annual maximum expense of $400 x 10 employees x 12 months = $48,000. Application of the 89% utilization rate predicts an actual annual expenditure of $380 x 10 employees x 12 months = $45,600. Employer Allowance Utilization Rate Comparison Among States 60% - 70% 70% - 80% 80% - 90% 90% -

7 6 Employer Allowance Utilization Rate by State 0% 20% 40% 60% 80% Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisianna Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming 63.8% 70.1% 68.5% 75.4% 82.7% 81.9% 79.6% 88.5% 95.5% 86.8% 86.4% 88.4% 92.4% 99.5% 92.6% 90.7% 91.1% 99.2% 99.4% 97.4% 95.3% 98.3% 95.0% 95.2% 96.2% 0% 20% 40% 60% 80%

8 7 Utilization amounts also vary by industry. The chart below details average employer allowance and reimbursement, by industry, in the United States. INDUSTRY EMPLOYER ALLOWANCE REIMBURSEMENT AMOUNT UTILIZATION Agriculture $471 $ % Banking/Finance $539 $ % Biotechnology $719 $ % Business Services $556 $ % Chemicals $224 $ % Communications/Telecommunications $325 $ % Construction $393 $ % Consulting $549 $ % CPA $428 $ % Dental $347 $ % Education $375 $ % Energy $419 $ % Engineering $602 $ % Entertainment/Media $373 $ % Environmental $399 $ % Food & Beverage $396 $ % Government $518 $ % Healthcare $391 $ % Hospitality $301 $ % Insurance $517 $ % Legal $483 $ % Machinery $452 $ % Manufacturing $357 $ % Medical Services $824 $ % Not For Profit $494 $ % Other $440 $ % Real Estate $370 $ % Recreation $350 $ % Retail $399 $ % Technology/Software/Electronics $539 $ % Transportation $354 $ % Utilities $404 $ %

9 8 DEFINED CONTRIBUTION VS. GROUP HEALTH INSURANCE Employers using a defined contribution health benefits solution are realizing cost savings of 57%, on average, compared to average group health insurance costs. This cost comparison is based on the Kaiser/HRET 2015 Employer Benefits Survey which concluded that employers pay an average of $521 per month per single employee and $1,462 per month per family for group health insurance coverage. The comparative value of a defined contribution health benefits solution varies by employer and by region. The following map provides a visual comparison of average savings by state. The data takes into consideration average employerfunded reimbursement amounts by state as well as average group health insurance costs by state (Kaiser/HRET, 2015). Employer Annual Cost Comparison by State DEFINED CONTRIBUTION 0 - $2,000 $ $6000 $ $10,000 $10,000 - $14,000 GROUP HEALTH INSURANCE $14,000 - $18,000

10 Defined Contribution vs. Group Health Insurance Cost Comparison 9 $0 $2000 $4000 $6000 $8000 $10,000 $12,000 $14,000 $16,000 Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisianna Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Defined Contribution Plan average annual cost for family coverage Group Health Insurance Plan average annual cost for family coverage $0 $2000 $4000 $6000 $8000 $10,000 $12,000 $14,000 $16,000

11 10 CONCLUSION Small business employers all over the nation are adopting and implementing employer-funded, defined contribution health plans, as an alternative to traditional group benefits. Defined contribution plans offer significant value to employers and facilitate employee access to the quality coverage and perks of the modern individual health insurance market. Employers are realizing average savings of 57% using such plans, when compared with the costs of offering traditional group health insurance. This savings drastically improves the ability to afford and, in many cases, enhance their employee benefits offering. Ultimately, this improves the ability of the small business to recruit, retain, and compete for skilled human resources. METHODOLOGY The data in this report was gathered from the current Zane Benefits customer base, including information from all company sizes, and only represents participants in defined contribution Health Insurance Reimbursement Programs. The report analyzed a statistically valid set of active employer accounts during the 2015 calendar year. Averages for states and industries consider different sample sizes and have been weighted accordingly. Approximately 7,900 participant records contain industry information. Individual states have been categorized by region according to the practices followed by Census.gov.

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