The ACA notwithstanding, employer spending on health insurance per employee is dropping
Employers appear to be adapting to the Affordable Care Act (ACA) and, despite the new mandates, are spending less on health insurance per employee than they have in the past, according to new research.
Employee eligibility rates have risen since January, 2014, when the major provisions of the ACA began phasing in, but employee participation levels have held steady, helping employers to limit their overall health spend.
“Employers appear to have made appropriate adjustments to contain costs, while complying with ACA requirements,” states the ADP Research Institute’s just released 2016 Annual Health Benefits Report.
Health insurance premiums have risen, per the ADP study, but the increases have been small compared to those seen prior to 2014. Monthly premiums only rose an average of 5% from 2014 to 2016; between 2010 and 2013, they jumped a whopping 13.9%. Employer contributions this year amount to about 76 percent of the total, or an average of $672.
But these are averages, and the impact of the ACA on employers varies significantly depending on their size and experience in providing health benefits. “Most of the employers in this study are larger, self-funded employers that had prior experience offering benefits before the Affordable Care Act,” observes Christopher Ryan, vice president of Strategic Advisory Services at ADP. “For these employers, the real issues around the ACA are mostly related to reporting compliance, and the impact on actually delivering benefits has been very small.”
A stable landscape
In general, the employer-sponsored health benefits landscape has remained stable. About three-fourths (76%) of eligible employees opted to purchase health insurance this year, helping employers control their costs. Eligibility increased for every age group, however, over the past two years, rising 2.3 percent from 2014.
Employees under the age of 26 had the highest increase in eligibility—3.9%—but had the lowest participation rate by a wide margin. Only 44% of workers under age 26 participate in employer plans compared with 71% of workers between the ages of 26 and 54. The group with the highest participation rate is the youngest Baby Boomers, aged 55 to 64 years old.
Low participation in health plans by employees under age 26 continues a trend first observed by ADP in 2011 and is now 1.7% below 2014 levels. Instead, the study found, an increasing percentage of younger workers are choosing to remain on their parents’ health plans.
Another shift is due to more employees delaying retirement and remaining in the workplace longer. This broadens the age range of the workforce, creating additional challenges for employers.
“Communicating with employees is much more challenging than in the past,” Ryan explains. “To communicate benefit information to a 22-year-old and a 70-year-old, you might have to use very different media, for instance.”
Another complication is that some benefit offerings might be more valuable for one group than another. For instance, “A consumer directed health plan may make a great deal of sense for a younger person who will be accumulating value in a health savings account,” Ryan notes. “But an older employee with a chronic condition and a set amount of spending might not be able to accumulate any money in an HSA.”
The study also found that employees who earn less contribute a higher percentage of their income toward their health plan benefits, with those earning between $15,000 and $20,000 contributing 8.1% of their income, while those who earn more than $120,000 only contribute 2.4% of their annual earnings.