2010 Colorado Employer Benefits Survey Report

Transcription

1 2010 Colorado Employer Benefits Survey Report Prepared by: Lockton Companies, LLC October 28, East Union Ave., Suite 700 Denver, CO (303)

2 INTRODUCTION AND PURPOSE In the fall of 2009, Lockton Companies, LLC conducted its annual Colorado Employer Benefits Survey. Our firm invited 863 employers throughout the state of Colorado to provide information specific to their employee benefit offerings; 173 responded to the survey. The employers surveyed were selected based on their size, industry, and visibility in the community. This survey was designed to provide a representative cross sample. It was not developed to be a scientific sample. The survey s purpose was to identify the following: What rate of increase are employers experiencing for healthcare coverage for 2010? How aware are employers about all the details in the federal healthcare reform debate? What are employers greatest concerns regarding their insurance benefit programs? How do the 2010 health plan rate increases compare with merit pay increases? What are employers expected health insurance strategies for 2010? To what degree are employers utilizing consumer-directed healthcare strategies to reduce cost trends? How do cost increases for Colorado employers compare to results reported in various national surveys and previous local surveys? EXECUTIVE SUMMARY The results of this year s survey identified several notable trends in the Colorado markets. In many respects, the Colorado trends are widely divergent from what is being reported nationally. 1. For the ninth consecutive year, the average company received a double-digit rate increase for its health plan. The average increase in Colorado for 2010 was 11.8% (before plan design changes). This rate of increase is significantly greater than what is being reported nationally. To mitigate this, more than 79% of employers plan to pass some portion of the rate increase to their employees through plan design changes and premium share increases. Of these options, the primary focus for these employers in 2010 will be increasing the amount that employees contribute (through payroll deduction) for single and dependent coverage. 2. Only 25% of surveyed employers responded that their senior management was very familiar with the various federal healthcare reform proposals being considered. 68% responded that they were somewhat familiar. The financial impact of healthcare reform on employers is yet to be determined % of respondents report medical plan deductibles of $1,000 or more. 70% of respondents report medical plan deductibles of $500 or more. This is higher than national reports and is more than the 39% reported in of employers will be considering offering a health savings account (HSA)/high deductible health plan (HDHP) in There has been a significant increase in the 2

3 number of employers offering HSA/HDHPs over the prior year with 27% of employers surveyed offering such plans, up from last year s 15%. This rate is now higher than what is being reported nationally. 5. The percentage of employers offering an HMO plan decreased from 4 in 2008 to 32% in Most employers (91%) are offering PPO plans with higher deductibles and higher out-of-pocket expenses, or a HDHP. 6. Employers are more concerned than ever about plan cost increases. 85% indicated this is a major or critical concern. The second greatest concern (73%) was federal/state legislation issues (healthcare reform, etc.). 7. This is the third consecutive year that provider quality outranked employee dissatisfaction with their benefit as an area of concern. 8. There is a continued strong interest in self-funding among Colorado employers. This trend remained about the same with employers reporting 33% being self-funded in 2008 and 35% in Thirty-six percent of employers in Colorado are evaluating whether to offer a wellness plan in 2010 as a further cost containment measure. This represents a slight decrease over last year s 38%, but the decrease is not statistically significant. TYPE OF RESPONDENTS The chart on the next page reflects the survey respondents industries. 46% of respondents were in the following four industries: Healthcare 1 Government 13% Construction 10% Non-Profit 9% 3

4 2010 Colorado Employer Benefits Chart 1 Survey Report 3% 1% 9% 8% 1% 3% 3% 1% 1% Employer Industries 1% 1% 10% 3% 3% 13% 1 Aviation/Transportation Communications Constructionn Education Energy/Oil/Gas/Electric Engineering Financial/Banking Government Health Care Insurance Law Manufacturing Mining Non-Profit Real Estate Research/Development Resort/Entertainment/Recreation Retail/Wholesale/Distribution Services Technology Trucking Other The table below reflects the number of survey respondentss categorized by company size (in terms of benefit eligible employees). Table 1 EMPLOYER SIZE Number of Benefit Eligible Employees 5,000+ 2,000-4,999 1,000-1, Under 51 Number of Responses 1% 6% 6% 12% 15% 27% 1 20% 4

5 2010 Colorado Employer Benefits Survey Report The data in Chart 2 below reflects the approximate geographic location of the survey respondents. Chart 2 Employer Location 2% 7% 9% 3% 8% Denver Metro Area Southern Colorado Western Slope Boulder/Foothills Area Northern Colorado Mountain Towns & Resorts 69% This survey generally reflects typical Colorado employers in terms of employee size and industry. The Kaiser Family Foundation, Hewitt, Segal, Mercer, and others also conduct annual surveys of employers nationally; however, these entities tend to focus on much larger employers. Colorado- based employers tend to be smaller than the employers reflected in the national surveys. They typically have fewer financial resources to rely on when health plan rates continue increasing. Therefore, smaller Colorado-based employers may be more significantly affected by the level of health plan rate increases, the type of plan designs, etc., than national employers. COLORADO EMPLOYER CONCERNS Table 2, on the next page, reflects employers greatest concerns from 2000 to They are listed in order of greatest concern (1) to least concern (6). This year, as well as in the past eight surveys, employers greatest concern regarding their employee benefit plans was plan cost increases (85%). Employers second highest concern (73%) was federal/state legislation (healthcare reform, etc.). This concern has ranked fifth for five of the past six years. The uncertainty of the impact thatt the final legislation will have on employers is a great concern. Provider quality (5) was the next highest concern. In previous years, employee dissatisfaction with their benefits had been one of the top three concerns. This is the third time since the 2003 survey that employee dissatisfaction did not score in the top three. 5

6 Table 2 Colorado Employer Concerns Plan cost increases Federal/state legislation * Provider quality Employee dissatisfaction; attraction/ retention Health plan quality Managing HIPAA privacy 5 5* and security issues *same scores HEALTH PLAN FINDINGS The data in Chart 3 below reflects the changes in health plan funding from In 2009, the number of Colorado employers who reported offering self-funded plans increased slightly from those reporting in 2008 (35% in 2009 vs. 33% in 2008). In 2000, 16% of surveyed employers offered a self-funded plan whereas 35% of employers are self-funding their health plan in % of employers reported offering a fully insured plan in This number increased slightly from 5 in Since 61% of the respondents have fewer than 300 employees, the employer size may skew the results toward fully insured plans. Typically, smaller employers choose fully insured plans due to their inability to take on the risk of a self-funded health plan. Chart 3 70% 60% 50% 40% 30% 20% 10% 0% HEALTH PLAN FUNDING RESULTS 65% 61% 55% 51% 5 57% 57% 55% 43% 39% 41% 3 31% 33% 31% 29% 35% 26% 16% 1 12% 13% 1 10% 10% 8% Fully Insured Self Funded Combination 6

7 PLAN TYPES Chart 4 below demonstrates the type of benefit plans being offered from Chart 4 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% BENEFIT PLANS OFFERED TO EMPLOYEES 89% 81% % 65% 69% 72% 61% 6 60% 55% 42% 36% 39% 37% 37% 4 25% 32% 19% 20% 20% 27% 12% 15% 21% 11% 9% 11% 13% 5% 16% 1 9% 1% 1% 2% 0% 0% 2% 10% 3% 2% HMO POS PPO INDEMNITY HDHP Employers continue to shift costs to employees by imposing higher employee payroll contributions for single and dependent coverage, increasing deductibles/copays/out-of-pocket limits, and adding a high deductible plan option. Nearly 70% of employers reported that their health plan deductible is $500 or greater. This is a dramatic increase from 39% in Nearly 41% of employers reported that their plan deductible is $1,000 or greater. This is an increase from 37% in This is another indication of how rising medical costs are affecting Colorado employers and employees. The survey results indicate a decline in HMO plans to 32% of those surveyed, down from 4 in This is a significant change. The number of employers offering HDHPs increased from 3% in 2003 to 27% for This is a significant increase from 1 in Offering HDHPs is another way that employers are dealing with the continually increasing costs of providing health coverage to their employees. An additional 2 of the respondents reported that they are considering the addition of an HDHP in AVERAGE RATE INCREASES We asked Colorado employers how much of a rate increase they received for their health plan for 2010 before benefit changes. Chart 5, on the next page, indicates how employers responded to this question. 7

8 2010 Colorado Employer Benefits Chart 5 Survey Report 20% 18% 16% 1 12% 10% 8% 6% 2% 0% Health Insurance Plan Cost % Rate Increase Before Plan Changes 19% 18% 15% 13.5% 12.9% 13.7% 12% 12% % 2009 Chart 5 shows the 2009 average renewal rate increase is 11.8%, which is a lower average increase than was reported for For most employers, the continuation of double-digit increases is of great concern becausee of the compounding affect they have on total cost, year over year. We asked employers what the final rate of increase was after they made plan changes. The average increase reported was 7.. COST SHIFTING STRATEGY As healthcare costs continue to increase, employers are considering additional ways to mitigate their plans ncreasing costs. We asked employers which strategies they intend to use in Respondents could choose more than one answer and the top ten results are captured in Table 3 below. Table 3 Cost Shifting Strategy Increase employee premium contributions for family coverage Increase employee premium contributions for single coverage Increase deductibles Absorb the cost increase Increase amount employees pay for prescription drug coverage Increase employee out-of-pocket expensee Increase the amount employees pay for office visits Change insurance companies Addd a HDHP with an HRA or HSA Addd a HDHP Offer only a HDHP with HRA or HSA Response Ratio 56% 55% 4 36% 29% 26% 25% 21% 11% 6% 6% 8

9 The most notable change in the 2010 employer survey results indicates that 4 of employers will increase deductibles vs. 36% last year. Also of note is the reduction in the number of employers who will increase employee contributions for single coverage (55%) vs. 66% in For family coverage, it dropped to 56% vs. 65% in PREMIUM COST SHARING Employers continue to receive double-digit rate increases. As a result, many employers are shifting costs to their employees in the form of higher premium payments. Table 4 below indicates the percentage of premium that employees are expected to contribute to their single coverage. Almost 86% of employers expect employees to contribute 30% or less of the single premium rate. Table 4 EMPLOYEE CONTRIBUTION TOWARD SINGLE COVERAGE % of Premium % of Employers 0-9% of Premium 35% 10-19% of Premium 29% 20-29% of Premium 22% 30-39% of Premium 12% 40-49% of Premium 2% Over 50% of Premium 7% Table 5 below indicates the percentage of premium employees are expected to contribute to their dependent coverage. Almost 48% of employers will expect employees to contribute more than 30% of the family premium rate. Table 5 EMPLOYEE CONTRIBUTION TOWARD DEPENDENT COVERAGE % of Premium % of Employers 0-9% of Premium 11% 10-19% of Premium 18% 20-29% of Premium % of Premium 17% 40-49% of Premium 7% Over 50% of Premium 2 9

10 Of the employers surveyed, only 13% do not plan to pass on any percentage of the employer s rate increase to their employees. 49% plan to pass up to 25% of the increase to their employees. The remaining 38% of surveyed employers plan to pass some portion of the 2010 rate increase to their employees as they did in the prior year. PLAN COST vs. MERIT INCREASES We asked employers to indicate what their merit increase factor will be for Results indicate the estimated average will be 1.7%, down from 2.9% in However, the majority of employers expect to pass along a large percentage of the health insurance premium rate increase to their employees. This may result in more employees waiving health insurance coverage due to their inability to pay for this expense, thus potentially increasing the number of uninsured. When we asked employers if they had considered medical cost sharing strategies based on salary/pay level, 89% said they had not. INFLATION FACTORS We asked Colorado employers to rank the following items in the order to which they contribute the most to increases in their health plan costs. Table 6 below reflects the factors in order of importance. Table 6 Health Plan Cost Increase Factors Medicare/Medicaid cost shifting Mandated coverages 4.1 Technology Legal liability Aging population Physician charges Prescription drug costs Higher utilization Rising hospital costs OTHER BENEFITS OFFERED We asked employers what other non-retirement benefits are most commonly offered to their employees. Dental is the most popular form of coverage offered to employees after medical coverage. Over 73% of the employers surveyed also offer a form of disability coverage, group life insurance, vision insurance, and a flexible benefit plan. See Chart 6, on the next page, for more details on these and other lines of coverage. 10

11 2010 Colorado Employer Benefits Chart 6 Survey Report ANCILLARY BENEFITS Dental 97% Vision 73% Short Term Disability 73% Long Term Disability 87% Long Term Care 15% Employee Assistance Plan 6 Supplemental Medical Plans 23% Flex Benefit Plan 83% Group Suppl/Voluntary Life 70% Group Life 95% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% In addition to the benefits listed in Chart 6 above, 36% of the surveyed employers plan to offer their employees a wellnesss plan in This is a slight decrease from the 38% reported in Wellness plans are expected to continue to be an important tool as employers struggle to control medical and other employee benefit plan costs. GENERAL INFORMATION Employers consult the following resources for technical benefits questions: Broker/Consultant 86% Mountain States Employers Council 61% Insurance Carrier 46% Attorney 36% Human Resource Associations (SHRM/CHRA) 36% Third-Party Administrator 3 Publications 26% When asked about their top two concerns about external forces affecting their business profitability in 2009, Colorado employers responded: Economy 82% Healthcare cost increases 41% Proposed healthcare reform 38% Status of financial markets 27% Energy prices 9% Shortage of qualified workers 8% Taxes 8% 11

12 CONCLUSIONS Colorado employers estimate the merit pay increases for 2010 will be approximately 1.7%. However, health premium increases are expected to be 7. (after plan changes) for the 2010 plan year. Many employers indicated they would pass on much of this premium increase to their employees in the form of higher premiums and reduced benefits. This may result in more employees waiving medical plan coverage due to costs and a perceived lower value of the benefit. For the fifth consecutive year, employers number one cost containment strategy will be to increase their employees premium contribution for family coverage. In fact, 56% of employers expect to increase the employees contribution for family coverage. Approximately 11% of those who responded will add a HDHP option with a HRA or HSA. This is in addition to the 27% already offering such plans. This increase in the number of employers with HDHPs is significant. Some continue to question if the long-term use of HRA/HSA plans could be more costly to employees who utilize their health benefits more frequently and are lower income. The final results of healthcare reform could have a great impact on these types of plans. Only 25% of surveyed employers responded that their senior management was very familiar with the various federal healthcare reform proposals being considered. 68% responded that they were somewhat familiar. The financial impact of healthcare reform on employer health plans is yet to be determined. 12

13 END NOTES Benefit Management & Design, Inc. conducted this survey from Lockton Companies, LLC purchased Benefit Management & Design, Inc. in 2005; Lockton continues to conduct this survey. Lockton is the world s largest, privately owned, independent insurance broker. Lockton s Denver Office is one of Colorado s largest insurance brokers. Out of the 863 employers surveyed in 2009, 173 responded. This represents a 20% response rate. Cover pictures are from 2009 JupiterImages Corporation. WHO IS LOCKTON? Our Philosophy We Live Service! World s largest, privately owned, independent insurance broker Tenth largest insurance brokerage firm in the world Established in 1966 in Kansas City, MO $787+ million in annual revenue (worldwide) 49 U.S. and international offices in 34 countries More than 3,500 associates worldwide More than 15,000 clients around the world In Denver since associates 58 in employee benefits consulting practice Health/Welfare Plans Retirement Plans Executive Benefits Please contact Deb Smith, deb.smith@lockton.com or (303) , if you have questions about this survey report. 13