In 2013, the average annual premium for employer-sponsored health insurance was $5,884 for single coverage and $16,351 for family coverage. But according to the National Business Group on Health (NBGH), costs of providing benefits at the largest U.S. employers is projected to increase a staggering 7 percent in 2014—leading many businesses to consider high-deductible health plans (HDHPs) as a way to reduce overhead while maintaining their employee coverage. The sticker shock, however, of these consumer-driven health plans has many American workers worried.
Analysts project that the average out-of-pocket costs to employees covered by HDHPs, with an annual deductible of $1,250 or more for individual coverage, are expected to increase to $2,470 per year. These projections mean that over the past decade, the employee share of healthcare costs increased almost 150 percent—from $2,011 in 2004 to $4,969 in 2014.
Employers offer HDHPs for the low premiums—which are less costly to the employer, as well as to their healthy employees—because employees are responsible for sharing the overall costs. A recent Rand study shows that enrolling in an HDHP results in a 13-25 percent cost reduction within the first year, and two-thirds of savings result from fewer doctor visits.
In 2013, 17 percent of employers offered the HDHP as their only option—a 31 percent increase over 2012, and according to the NBGH, studies project this figure to grow to nearly 80 percent next year, given the plans’ potential to reduce employer health costs.
How does it affect business?
Supporters of HDHPs are confident in their ability to financially incentivize employees to become more responsible for their medical spending, especially as most health insurance companies are now providing price-estimator tools employees can use. Proponents argue that if employees are able to see that an MRI can cost anywhere from $150 to $2,500, they will become more selective when seeking it out as a course of treatment, which eliminates wasteful or unnecessary spending and procedures. Critics acknowledge that HDHPs will only shift spending from employers to patients, not reduce overall costs, assuming that some patients will forgo needed care.
In this new era of healthcare, as HDHPs become the new normal for employer health coverage, striking a balance between costs to employers and employees becomes an even more important and vital consideration for business growth, financial gains and employee retention.