If misery loves company, PHCP distributors can take solace knowing that they're most certainly not wallowing alone. In 2005, overall U.S. employer health insurance premiums increased by 9.2% - nearly three times the rate of inflation. The annual premium for an employer health plan covering a family of four averaged nearly $11,000, for single coverage over $4,000, according to the National Coalition on Health Care (NCHC).
A recent survey conducted by SUPPLY HOUSE TIMES shows our industry's health care burden to be in that same ballpark. Sixty-nine percent of those responding reported paying between $301 and $1,000 per month per covered employee for health care, including dependent coverage. That projects to between $3,600 and $12,000 per year per employee. (This survey question did not distinguish between single and family coverage.)
The average number of employees reported by wholesalers responding to our survey was 36. The average health care insurance bill in our industry came to over $243,000, according to our survey. This arithmetic computes to an average per-employee cost of $6,750.
PPOs MOST COMMONA little more than one out of five respondents, 21%, indicated their companies do not offer any type of medical insurance. Among the 79% that do, by far the most popular arrangement was a PPO, cited by 45%. Another 19% were attached to HMO plans, while 12% opted for a POS.
A majority, 57%, reported their health care plans partially funded by employees. More surprising to us was that a sizable minority of PHCP wholesalers, 40%, reported plans that were fully insured by the company. The remaining 3% reported employee self-funded plans.
Two-thirds of the plans offered in our industry include dependent coverage. Employees alone were covered in 27% of the plans, while 6% offered coverage of employee and spouse.
About 20% of wholesalers reported paying less than $20,000 annually on health care, while at the other extreme 11% found their bills running upwards of $400,000 a year. This is largely a function of company size, of course.
PREMIUM INCREASESAccording to our survey, premium increases skyrocketed for PHCP wholesalers last year. A sizable 63% of survey respondents reported double-digit premium percentage increases in 2005, averaging 13%. Over the past three years, premium increases have averaged a cumulative 31% in the industry, according to our survey.
Industry wholesalers are doing their best to absorb the costs. A hefty 41% of respondents reported requiring employees to pay no part of the monthly premiums. At the other extreme, a quarter of the respondents said they require employees to pick up between 26-50% of the cost, while 4% of respondents said employees pick up more than half.
Co-pay and deductibles eat up more than $1,000 a year for employees, according to 46% of respondents. One out of five said employees pay between $2,000 and $4,000 a year.
COPING MECHANISMSAnother question on our survey asked wholesalers to identify actions their company has taken in the past three years to cope with rising health care costs. Top actions (multiple responses allowed) included:
Raised deductibles (58%)
Raised employee co-pay amounts (42%)
Changed insurers (42%)
Raised employee share of premiums (37%)
Reduced overall coverage (15%)
Dropped health insurance altogether (1%)
DENTAL & ANCILLARY COVERAGESOnly 40% of respondents reported providing dental coverage. The vast majority of those (31%) offered plans covering entire families. Another 3% offered plans covering employees and spouses, while the remaining 6% said dental coverage applied only to employees.
Only 21% of those companies pick up the full cost of dental coverage. The largest proportion, 37%, said employees and the company split the cost, while 34% reported employees fully pay for dental coverage. The remaining 8% said it was included with other health insurance.
The average per-employee expenditure for dental coverage was over $11,000.
Only 23% of respondents reported offering a vision plan. Among those responding positively, 29% said the company fully funds the vision coverage, 27% said it was included with other insurance, 25% reported a split in cost between employees and the company, while 19% said employees fully fund their vision coverage.
Only 45 wholesalers of the 666 total responses indicated that they provided preventive health care incentives to employees. The most common program cited was smoking cessation, followed by weight reduction, health club membership and on-site workout facilities. Other mentions included blood pressure screening, yoga classes, flu shots and wellness programs.
FSAs & HSAsOur industry's wholesalers do not appear to be part of the cutting edge when it comes to participating in tax-favored health care funding initiatives such as flexible spending accounts (FSA) and health savings accounts (HSA). Only 17% reported offering an FSA to employees, in which employees set aside pre-tax earnings for health care spending, although money not spent in the calendar year is lost. Another 2% of respondents said they will be starting an FSA plan within a year and 5% of survey respondents admitted to being unfamiliar with the concept.
The newer HSA mechanism allows employee pre-tax savings to be carried over indefinitely to pay for health care. These accounts also are portable, allowing employees to draw from the accounts if they change jobs. Only 8% of 617 respondents to this survey question offered HSAs. Another 3% said they would be starting a plan within a year, while 4% said they were unfamiliar with the concept.
A copy of the entire survey, “Impact of Health Care Costs on PHCP Wholesalers, May 2006,” can be obtained for $95. Contact Cory Maxwell at firstname.lastname@example.org , or call 248-244-6415.
Sidebar: Survey MethodologyThe survey, “Impact of Health Care Costs on PHCP Wholesalers, May 2006” was jointly designed and conducted by SUPPLY HOUSE TIMES and BNP Media Market Research, a unit of market research professionals employed by our corporate parent. Surveys were returned by 666 executives with titles of chairman, president, partner or owner of a PHCP wholesaler firm.
Names were selected at random from our mailing list and all regions are represented proportionally. A separate mailing was sent to members of the North Central Wholesalers Association, which inspired this survey as part of a panel discussion on health care issues at last month's NCWA convention. NCWA responses are represented by the blue bars on the charts. Caution is urged in interpreting NCWA responses because of the small number of responses compared with our survey universe at-large. For the national survey, our market research staff has calculated a statistical margin of error of plus-minus 3.85%.
Our survey was compiled between March and April 2006, and achieved a response rate of 26%. This was an extraordinary response considering the detailed nature of the survey. We interpret this as a sign of the resounding importance of this issue to our readers.
Sidebar: Eye-opening Facts About Health Care
- Nationally, total spending on health care was $1.9 TRILLION in 2004, or $6,280 per person. That represented 16% of GDP, or 4.3 times the amount spent on national defense.
- The U.S. health care system is strikingly inefficient. Although nearly 46 million Americans are uninsured, the U.S. spends more on health care than other industrialized nations, including those countries that provide health insurance to all their citizens. Whereas the U.S. spends 16% of GDP on health care, it accounts for only 10.9% of the GDP in Switzerland, 10.7% in Germany, 9.7% in Canada and 9.5% in France.
- In 1960, consumers paid about 49% of health care expenses out-of-pocket. That percentage has steadily dropped. By 2005, consumers paid only around 9% of total health care bills. (Source: CMS.)
- Premiums for employer-based health insurance rose by 9.2% in 2005, the fifth consecutive year of increases over 9%. All types of health plans - including health maintenance organizations (HMOs), preferred provider organizations (PPOs) and point-of-service plans (POS) - showed this increase.
- The annual premium that a health insurer charges an employer for a health plan covering a family of four averaged $10,800 in 2005. Workers contributed $2,713, or 10% more than they did in 2004. The annual premiums for family coverage eclipsed the gross earnings for a full-time, minimum-wage worker ($10,712).
- Since 2000, employment-based health insurance premiums have increased 73%, compared to cumulative inflation of 14% and cumulative wage growth of 15%.
Health insurance expenses are the fastest growing cost component for employers. Unless something changes dramatically, health insurance costs will overtake profits by 2008.
Except where otherwise noted, all data cited here comes from the National Coalition on Health Care.