Survey: Michigan Employers Shifting Healthcare Costs to Employees

A survey of mid-sized Southeast Michigan employers shows that health benefits are on par with national trends as traditionally rich benefit offerings go by the wayside, according to McGraw Wentworth, a Michigan-based employee group benefit brokerage/consulting firm.

McGraw Wentworth’s 2010 Southeast Michigan Mid-Market Group Benefits Survey tracks health benefits and trends for 2010 among 414 southeast Michigan organizations with 100-10,000 employees.

Highlights of the survey results show:

• Michigan employers are making dramatic changes in plan design including more cost-shifting to employees in the form of increased payroll contributions, deductibles, and co-pays;
• Increased availability of/enrollment in Consumer Driven Health Plans (CDHPs) where employees assume greater financial and health care purchasing responsibility. In 2010, 23 percent of employers – compared to 19 percent in 2009 – are offering CDHPs; 4 percent make CDHPs the sole offering. Employee contributions to CDHPs nearly doubled from $41 to $75 per month from 2009 to 2010 for a single enrollee.
• Median PPO deductibles increased significantly. The deductible for single in-network coverage increased to $500 from $300 in 2009 and the family deductible increased to $1000 from $600.
• HMO plans are shifting from 100 percent coverage and fixed co-pays to coinsurance.
• Use of spousal eligibility restrictions continues to increase.
• Despite the economy, employers continue to invest in wellness programs with more employers tying achievement of health goals to incentives, as well as offering programs to spouses and dependents.
• Health care benefits costs for Michigan employers after plan design changes are increasing in 2010 at an average rate of 7 percent.

The survey cites 102 top-performing organizations, both union and non-union, called TrendBenders that have been successful in keeping their average benefit cost increases at or below 3 percent over two consecutive years.

TrendBender strategies include: auditing enrolled dependents; aggressively implementing CDHPs including funding a portion of employee health savings accounts; increasing deductibles; introducing a three-tier prescription co-pay system (generic, brand formulary, brand non-formulary); applying smoker surcharges; and emphasizing wellness in their benefit plan design.

ThesSurvey analysis includes a Total Cost Ratio comparing what Michigan employers and employees are paying in total for PPO, HMO or CDHP coverage in 2010.

The 2010 Total Cost Ratio for a median PPO plan for an individual was $580 per month of which the employer paid 57 percent or $329 in premiums and the employee paid 43 percent or $251, a combination of payroll deduction ($103), deductibles and co-pays ($148). In 2009, the Total Cost Ratio was $532 per month (employer paid 59 percent; employee paid 41 percent). In contrast, the 2004 Total Cost Ratio was $382 per month (employer paid 67 percent; employee paid 33 percent).

Employers and employees are seeing higher dollar costs, and, while employee cost sharing is increasing, employers also are building in substantial incentives to encourage appropriate care choices such as increasing co-pays for ER visits to $100 versus $25 for Urgent Care. Increasingly PPO enrollees are paying a percentage of the charge for an office visit versus flat copay that serves as an incentive for employees to make cost-effective choices, starting with knowing the cost of the care.

The McGraw Wentworth Mid-Market Group Benefits Survey is the largest of its kind with 640 mid-sized employers participating including 414 southeast Michigan organizations.

Results for municipalities, school districts, and West Michigan employers will be released in June.

Respondents represent diverse industries with 25 percent considered auto suppliers and 29 percent having some unionized employees. The survey has a 4.1 percent error rate.

Source: McGraw Wentworth