Health Care Costs

Open enrollment – the time of year that many employees and employers either love or hate. Well, mostly hate because today’s health insurance open enrollment usually means higher costs – at least for my family of four.

But according to a new analysis by Aon Hewitt, health care rate increases in 2015 came in at the lowest rate increase in 20 years.

After plan design changes and vendor negotiations, the average health care rate increase for mid-size and large companies was 3.2 percent in 2015 – the lowest rate increase since 1996, according to Aon Hewitt’s data from the Aon Hewitt Health Value Initiative database, which captures health care cost and benefit data for more than 600 large U.S. employers representing 11.7 million participants, more than 1,200 health plans and nearly $59 billion in 2015 health care spending.

Aon projects average premium increases will jump to 4.1 percent in 2016.

“The sluggish growth in the economy has deterred many individuals from using medical services, and there’s also been modest price inflation – both factors have been primary drivers for the low rates of premium increases over the past few years,” said Mike Morrow, senior vice president of Aon Health. “As prescription drug costs continue to grow at a double-digit pace and the economy picks up speed, it’s likely these premium rates will start to climb.”

Despite the low rate of cost increase in 2015, the average amount that employees need to contribute toward their health care has increased significantly – more than 134 percent over the past decade.

According to Aon’s analysis, employees contributed $2,490 toward the premium and another $2,208 in out-of-pocket costs, such as copayments, coinsurance and deductibles in 2015. In contrast, the amount of employees’ premium and out-of-pocket costs combined in 2005 was just $2,001.

Low rate increases are prompting most employers to take a traditional “managed trend” approach to mitigating health costs, Aon said.

The percent of total health care costs covered by employers has decreased about 1 percent per year since 2012. Recent Aon research shows 38 percent of employers have increased participants’ deductibles and/or copays and another 46 percent may do so in the near future.

Another trend: Using high-deductible health plans (HDHP), the second most popular plan choice offered by companies, surpassing HMOs. Sixteen percent of companies offer a HDHP as the only health plan option today, and another 41 percent are considering doing so in the next three-to-five years.

Now back to open enrollment.