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Message
From An Actuary
Diane Luedtke,
FSA
Nationally,
the average annual health care premium for single coverage
in 2008 was $4,704 and the average annual premium for family
coverage was $12,680. Of that, workers contributed $721
(or 15%) annually for the cost of single coverage and $3,354
(or 26%) for the cost of family coverage.1 And,
costs are expected to increase another 6% in 2009.2
While the national figures are interesting, these numbers
tell you little about what is going on with your competitors
- those hiring away your employees or making the sale that
should be yours.
We understand that running a successful
business demands that all decision-makers be empowered to
control all production inputs from inventory to raw materials
to wages to benefit costs. Successful businesses do not
simply accept these input costs as givens. And with human
capital almost always the most valuable input into any business'
product, we seek to empower decision makers to make the
best benefit decisions possible.
Contacts
Tim Luedtke, FSA, MAAA, CFA
Principal & Consulting Actuary
Diane Luedtke, FSA
Principal & Consulting Actuary
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How
Competitive
Is Your Benefits Package?
How do you know . . .
what is your benchmark?
Diane
Luedtke, FSA
Employee
benefit offerings and decisions are essential for remaining
competitive. The weakened economy intensifies employer struggles
to maintain attractive benefits packages while managing costs.
Employer health care costs continue to increase 6% annually,
significantly impacting the bottom line. While benefits decisions
are largely driven by an employer's own objectives, those
objectives often include offering a benefits package that
compares favorably to their competitors. The following highlights
the leading storyline from recent national surveys, addresses
the use of benchmarks as information and decision-support
tools, and introduces the Navigator Benefit Solutions Employee
Benefit Survey.
Top National Story - Consumerism Has Arrived
Nationally the big story is the growth of consumer-driven
health plans (CDHPs). And, of course, health care costs
share the spotlight. As health care costs escalate, CDHPs
are becoming an increasingly popular measure to control
costs.
Consumer-driven health plans link high-deductible medical
plans with tax-favored accounts - either a Health Reimbursement
Arrangement (HRA) or a Health Savings Account (HSA). HRAs
are funded solely by the employer, while HSAs can include
both employer and employee contributions. Since their introduction,
CDHPs have shown steady growth in both offering rates and
participation. Key findings from the Kaiser Family Foundation1
include:
• CDHP Growth Continues . .
. In 2008, 13% of firms offered a CDHP,
compared to 10% in 2007 and 7% in 2006. The percentage of
workers enrolled in CDHPs increased from 5% in 2007 to 8%
in 2008..
• More Growth Expected . . .
26% of firms that do not currently offer
a CDHP say they are “somewhat or very likely”
to offer one in the next year.
• Large Firms are Leading The
Way . . . 22% of firms with 1,000 or more
workers offer a CDHP; 15% with 200 to 1,000; and 13% with
less than 200 workers
• YET . . . Employees of Smaller
Firms are More Responsive . . . 13% of workers
in firms with less than 200 workers are enrolled in a CDHP,
compared with 5% in firms with 200 or more.
• HSA-based plans are more popular
than HRA-based plans . . . among firms offering
health benefits, 11% offer a CDHP with an HSA and 3% with
an HRA.
The current economy is likely to accelerate the move of
consumer-driven plans into the mainstream as both employers
and employees are compelled to lower costs. Higher deductible
plans lower premiums simply because of cost shifting. The
bigger question is how much, if any, additional savings
are achieved by pairing a savings option with a high-deductible
plan. Ideally, changes in consumer behavior will result
in lower utilization and lower trend rates, generating savings
beyond the cost shift. With the proliferation of plans and
emerging experience, we will be better able to measure the
real savings.
What Is Happening Locally . . . Where's
The Benchmark?
There are numerous national benchmarking surveys that provide
useful information about the nature of group health benefits
nationally. While these may provide good general information
about the state of employee benefits, regional differences
are diluted and results are often distorted by large employers.
An employer's ideal benchmarking data would reflect groups
of similar size, locale and industry since benefit trends
correlate well with these factors.
Business leaders and owners know that well-informed decisions
are based on facts, rather than suppositions. In such extraordinarily
uncertain economic times, employers are faced with difficult
choices and need to know what their local competitors are
doing. Good benchmarking data supports sound decisions.
Relevant data will show how a company compares to others
in benefit offerings, costs, and cost-containment strategies.
Benchmarks serve as a guide to companies seeking to better
manage their health care costs while maintaining competitive
programs.
Navigator Benefit Solutions
appreciates that employee benefit offerings and costs vary
significantly by geographic area and size of employer. After
reviewing national surveys, we decided to dig deeper and find
out what's going on in the local marketplace - the market
most influencing our clients' hiring, benefit, and business
decisions. We will be collecting data from local companies
to establish reliable benchmarks and trends specific to the
local marketplace. Our goal is to develop customized benchmarks
to show how your benefit plans compare to others locally and
nationally. This information will help you make better-informed
benefit decisions.
The survey is on-line and participation is easy. To participate
in the survey please click
here. Navigator Benefit Solutions will share the survey's
results with participants so that you can learn about what
is happening in your local market.
1
Kaiser Family Foundation, Employer Health Benefits 2008
Annual Survey.
2 Mercer 2008 Survey of
Employer-Sponsored Health Plans. |
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