Originally Posted Online: Jan. 21, 2013, 5:50 pm
Last Updated: Jan. 21, 2013, 9:34 pm

4 out 5 Q-C companies report rise in health insurance rates

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By Jonathan Turner, jturner@qconline.com

In what's called the first local study of its kind, Quad-Cities employers saw their health insurance premiums increase an average of 7.9 percent in 2012, according to a comprehensive survey of 113 employers conducted for the new benefit-consulting firm, Benefit Staff of Bettendorf.

"A lot of our clients locally are curious how they stack up," Brad Johnson, a partner with Benefit Staff, said of the survey done by Des Moines-basedDavid P. Lind Benchmark and Data Point Research Inc.

Similar surveys have been done for central Iowa, statewide and nationally, but none were Q-C specific, he said.

Conducted last fall, the results are based on 113 responses from 956 randomly selected employers with two or more employees. Two-thirds of the responses were from firms with fewer than 50 employees, which is consistent with the makeup of local employers generally, Mr. Johnson said.

"I think first thing is, everyone wants to know where they stand. It helps us have a good conversation -- where do you want to be?" he said of health benefits, a controversial topic given the 2010 passage of federal health care reform.

The vast majority of Q-C employers (79 percent) reported their costs rose, while the rest said theirs dropped or stayed the same -- 8 percent and 13 percent, respectively. The average represents the increase in premium employers received before making design changes to their insurance plans.

The total average premium was $4,860 per year for a single employee and $12,504 for family coverage, according to the Q-C survey. Nationally, the average annual premiums in 2012 were $5,615 for single coverage and $15,745 for family coverage, according to a Kaiser Family Foundation survey of 2,121 firms.

Average premiums increased 3 percent for single and 4 percent for family coverage in the last year, Kaiser found.A national survey by human resources consultant Mercer found the average cost of health benefits rose 4.1 percent last year, the smallest jump in 15 years.

"The rate of increase is slowing," Mr. Johnson said. "There's been so much scrutiny to health care costs, I think transparency is taking effect. With premium increases year after year, at some point it has to slow down. It's just unsustainable."

The majority of the premium cost is absorbed by the employer. Q-C employers offering single coverage ask employees to pay an average of 30 percent of the total premium, and those with family coverage ask employees to pay an average of 36 percent, the study found.

Those percentages are higher than the nationwide averages, Mr. Johnson said.

The ways employers dealt with premium increases were to:
-- Increase employee contributions (55 percent of respondents)
-- Increase deductibles (35 percent)
-- Raise out-of-pocket costs for employees (24 percent)
-- Increase prescription drug co-payments (20 percent)
-- Change insurance companies (13 percent)

Since smaller employers typically have been hit with higher rate increases than large employers, they tended to more often choose the lower-cost high-deductible health plans that shift more cost on to employees, Mr. Johnson said.

Despite premium increases, no local employers reported dropping health insurance coverage in 2012.

"In spite of the rising costs, Quad-City employers are reluctant to drop health benefits due to the impact it could have on their workforce," Mr. Johnson said. "When all is said and done, the most common way for employers to mitigate cost increases is by asking employees to pay more to participate; either through increased payroll contributions, changes to plan design or both."

Increased costs also are partly because of the implementation of health care reform, including the requirement that dependents must be covered up to age 26, the consultant said. "It makes every provider of health care pretty careful about the increases they're asking for."

Many employers are concerned about what will happen to benefits in January 2014, which is a big milestone for health reform, Mr. Johnson said. That's when many provisions take effect and the financial penalties kick in for noncompliance with the law, which only impacts employers of 50 workers or more, he said.

There's also a minimum level of coverage employers have to offer, and most local employers already have met that, he said.

The Q-C study had multiple parts to it, including wellness programs, health information and benefits regarding vacation and sick leave, Mr. Johnson said, noting it may be continued on an annual basis.

Benefit Staff -- based at 2550 Middle Road, Bettendorf -- specializes in employee benefits. Mr. Johnson and his business partner,Mike Beaderstadt, have combined experience of more than 30 years in the health benefit marketplace. For more information, visit benefitstaff.com.

Q-C employer survey on health benefits

-- Overall average rate increase: 8.9 percent for employers with fewer than 50 workers, 6.3 percent for those with 50 or more.
-- Average total monthly premium: $405 single; $807 employee and spouse; $1,042 family.
-- Average monthly employee contributions: $124 single; $227 employee and spouse; $380 family.
-- Average annual deductible: $1,066 single/$2,181 family for traditional plans; $2,725 single/$5,450 family for high-deductible plans.
-- Average office visit copayment: $22 for primary care doctors, $35 for specialists.

Source: Benefit Staff 2012 employer survey