2012 Colorado Employer Benefits Survey Report - Lockton · 2012 Colorado Employer Benefits Survey 2...

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2012 Colorado Employer Benefits Survey Report October 28, 2011 L O C K T O N C O M P A N I E S, L L C

Transcript of 2012 Colorado Employer Benefits Survey Report - Lockton · 2012 Colorado Employer Benefits Survey 2...

Page 1: 2012 Colorado Employer Benefits Survey Report - Lockton · 2012 Colorado Employer Benefits Survey 2 INTRODUCTION AND PURPOSE In fall 2011, Lockton Companies, LLC conducted its annual

2012 Colorado Employer Benefits Survey Report

October 28, 2011

L O C K T O N C O M P A N I E S , L L C

Page 2: 2012 Colorado Employer Benefits Survey Report - Lockton · 2012 Colorado Employer Benefits Survey 2 INTRODUCTION AND PURPOSE In fall 2011, Lockton Companies, LLC conducted its annual

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INTRODUCTION AND PURPOSE In fall 2011, Lockton Companies, LLC conducted its annual Colorado Employer Benefits Survey. The firm invited 698 employers throughout the state of Colorado to provide information specific to their employee benefit offerings. The employers surveyed were selected based on their size, industry, and visibility in the community. This survey was designed to provide a representative cross sample. It was not intended to be a scientific sample. The purpose of the survey was to identify the following: The rate increase that Colorado employers experienced for health care coverage for the 2012

plan year. Employers’ greatest concerns regarding their insurance benefit programs. How employers’ 2012 health plan rate increases compare with average employee merit pay

increases. Employers’ health insurance cost reduction strategies for 2012. The degree to which employers are utilizing consumer-driven health care strategies to reduce

cost trends. How cost increases for Colorado employers compare to increases reported in various national

surveys and previous local surveys. EXECUTIVE SUMMARY The results of the 2012 Colorado Employer Benefits Survey identified several notable trends in the Colorado market. In some respects, the Colorado trends continue to be divergent from what is being reported on a national level.

1. For the first time in 11 years, the average health plan rate increase (before plan design changes) was 9.4%, much lower than previous years’ double-digit increases. This rate increase is much lower than what was reported last year (14.4%), but is still slightly higher than the 9% nationwide average recently reported by the Kaiser Family Foundation and the Health Research Educational Trust. To mitigate the increase, more than 77% of employers plan to pass some portion of the rate increase to their employees through plan design changes and/or premium share increases. Of these options, the primary tactic for these employers in 2012 will be increasing the amount that employees contribute (through payroll deduction) for single and dependent coverage.

2. Employers are more concerned than ever about plan cost increases. Nearly 92% indicated this

is a major or critical concern. The second greatest concern (52%) was provider quality.

3. More than 46% of respondents reported medical plan deductibles of $1,000 or more. This is higher than national reports, but is similar to the 48% reported in 2010. Nearly three-fourths of respondents (72%) reported medical plan deductibles of $500 or more.

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4. More employers offered a health savings account (HSA)-eligible high deductible health plan (HDHP) in 2011 (40%) than in 2010 (36%). This rate is substantially higher than the 18% rate reported nationally by the Kaiser Family Foundation. Additionally, one-fourth of employers will consider adding a HSA-eligible HDHP in 2012 if one is not currently offered.

5. The percentage of employers offering an HMO plan decreased from 36% in 2010 to 32% in

2011. Most employers (83%) are offering PPO plans with higher deductibles and higher out-of-pocket expenses, or an HDHP (with HSA or HRA).

6. This is the fifth consecutive year that “provider quality” outranked “employee dissatisfaction with their benefits” as an area of concern for employers.

7. There is a continued strong interest in self-funding among Colorado employers. This trend

remained the same with 32% of employers reporting they self-funded their medical plans in 2010 and 2011.

8. More than 46% of employers in Colorado are evaluating whether to offer a wellness plan in

2012 as an additional cost-containment measure. This represents an increase over last year’s 42%.

9. Health care reform’s impact is one of the top four concerns for business, yet the majority of respondents indicate their knowledge of the law is limited.

TYPE OF RESPONDENTS The chart on the next page reflects the survey respondents’ industries. Almost 57% of respondents were in the following five industries: Health care – 17% Government – 12% Education – 10% Services – 10% Non-Profit – 8%

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Chart 1

The table below reflects the number of survey respondents categorized by company size (in terms of benefit eligible employees). Table 1

EMPLOYER SIZE

Number of Benefit Eligible Employees Number of Responses 5,000+ 6%

2,000-4,999 8% 1,000-1,999 9%

500-999 13% 300-499 9% 101-299 18% 51-100 9%

Under 51 28%

4%

10%

5%

4%

12%

17%4%

4%

4%

8%

4%

6%

10%

4%4%

Employer IndustriesConstruction

Education

Energy/Oil/Gas/Electric/Utilities

Financial/Banking

Government

Health Care

Insurance

Manufacturing

Mining

Non-Profit

Real Estate

Retail/Wholesale/Distribution

Services

Technology

Other

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The data in Chart 2 below reflect the approximate geographic location of the survey respondents. Chart 2

This survey reflects typical Colorado employers in terms of employee size and industry. The Kaiser Family Foundation, Hewitt, Segal, Mercer, and others also conduct annual surveys of employers on a national level; however, these surveys tend to focus on much larger employers. Colorado-based employers tend to be smaller than the employers reflected in these national surveys, and often have fewer financial resources to rely on when health plan rates continuously increase. Therefore, smaller Colorado-based employers may be more significantly affected by the level of health plan rate increases than employers across the country. COLORADO EMPLOYER CONCERNS Table 2, on the next page, illustrates employers’ concerns from 2002 to 2011. They are listed in order of greatest concern (1) to least concern (6). This year, as well as in the past ten years, employers’ greatest concern regarding their employee medical plans was plan cost increases (92%). For the third year, employers’ second highest concern (62%) was federal and state legislation/compliance with federal health care reform. The uncertainty of the impact that health care reform will have on employers is of great concern. Provider quality (52%) was employers’ third highest concern.

70%

6%

2%

11%

4%6% 1%

Employer Location

Denver Metro Area

Colorado Springs/Southern Colorado

Western Slope

Boulder/Foothills Area

Northern Colorado

Mountain Towns & Resorts

Eastern Colorado

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Table 2 COLORADO EMPLOYER CONCERNS

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Plan cost increases 1 1 1 1 1 1 1 1 1 1 Compliance with health care reform; Federal/ State legislation

4 5 5 6 5* 5 5 2 2 2

Provider quality 3 3 3 2 3 2 2 3 4 3 Employee dissatisfaction; attraction/retention

5 4 2 3 2 4 4 4 5 4

Health plan quality 2 2 4 4 4 3 3 5 3 5 Managing HIPAA privacy and security issues

5 5* 6 6 6 6 6

*same scores HEALTH PLAN FUNDING The data in Chart 3 reflect the changes in health plan funding from 2000 to 2011. In 2011, 32% of Colorado employers reported offering self-funded plans, the same as in 2010. In 2000, 16% of surveyed employers offered a self-funded plan. More than 58% of employers reported offering a fully-insured plan in 2011. This number increased from 54% in 2010. This is not considered a statistically significant change. Since 55% of the respondents are “small” employers (i.e., have fewer than 300 employees), this may skew the results toward fully-insured plans. Typically, smaller employers choose fully-insured plans due to their inability to take on the risks associated with a self-funded health plan. Chart 3

41%

55%

65%

51%

57%

61%

57%

54%

55% 54%

58%

16%

31% 31%

39%

29%

26%

34%33%

35%32% 32%

43%

14%

4%

10%

14%12%

8%

13%

1%

14%

10%

0%

10%

20%

30%

40%

50%

60%

70%

2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

HEALTH PLAN FUNDING RESULTS

Fully Insured Self-Funded Combination of Fully Insured & Self-Funded

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PLAN TYPES Employers continue to shift costs to employees by imposing higher employee payroll contributions for single and dependent coverage, increasing deductibles/copays/out-of-pocket limits, and adding high deductible plan options. Nearly three-fourths (72%) of employers reported that their health plan deductible is $500 or greater, which is a slight increase from 71% in 2010. More than 46% of employers reported that their plan deductible is $1,000 or greater, which is a slight decrease from 48% in 2010. The survey results indicate that fewer employers are offering HMO plans in 2012 (32%) than in 2011 (36%). This is another indication of how rising medical costs are affecting Colorado employers and employees. The number of employers currently offering high deductible health plans (HDHPs) increased from 3% in 2003 to 40% in 2011. This is a slight increase from 36% in 2010. Offering a HDHP is another way that employers are dealing with the continually increasing costs of providing health coverage to their employees. An additional 26% of the respondents reported that they are considering the addition of an HDHP in 2012. Chart 4 shows the type of benefit plans offered from 2000 to 2011. Chart 4

89%

60%

55%

42%39% 37% 37%

44%

32%36%

32%

19%

36%

25%

12% 11%

2% 2%

15% 21% 15%

0%

61%

72%

65%

81%

74% 74%69% 72%

64%69%

83%

11% 9%5% 2% 9%

1% 1%

2% 4%1%

1%

0% 0%

3% 2% 10%

13%16% 14%

27%36%

40%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

BENEFIT PLANS OFFERED TO EMPLOYEES

HMO POS PPO INDEMNITY HDHP

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AVERAGE RATE INCREASES The survey asked Colorado employers how much of a rate increase they received for their health plan for the 2012 plan year before plan design changes. Chart 5 illustrates how employers responded to this question. Chart 5

Chart 5 shows that for the 2012 plan year, the average Colorado employer received a renewal rate increase of 9.4%, the lowest increase in ten years for Colorado employers. This is .4% higher than the average national rate increase recently reported by the Kaiser Family Foundation and the Health Research and Educational Trust. The survey asked employers what the final rate of increase was after they made plan changes. The average increase reported was 6.5%, down from 8.1% in 2011, though consistent with national benchmarks. COST SHIFTING STRATEGY As health care costs continue to rise, employers are considering additional ways to mitigate their plans’ increasing costs. We asked employers which cost mitigation strategies they intend to use in 2012. Respondents could choose more than one answer. The top ten results are captured in Table 3, on the next page.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

12%

19% 18%

15%

12% 13.5% 12.9%13.7%

11.8%

14.4%

9.4%

Health Plan Cost Increase for Em

ployers

Plan Year

Health Insurance Plan Cost PercentageRate Increase Before Plan Design Changes

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Table 3

COST SHIFTING STRATEGY

The most notable change in the 2012 employer survey results indicates that 33% of employers will increase deductibles, a significant decrease from 2011 (50%). Also of note is the reduction in the number of employers who will increase employee maximum out-of-pocket expense, 20% vs. 29% in 2011. At least 49% of employers will increase employee premium contributions for single coverage, down from 57% in 2011, as well as for family coverage, 53% down from 60% in 2011. PREMIUM COST SHARING Due to double-digit rate increases, many employers are shifting costs to their employees in the form of higher premium contributions. Table 4 indicates the percentage of premium that employees are expected to contribute to their single coverage. Almost 80% of employers expect employees to contribute less than 30% of the single premium rate. Table 4

EMPLOYEE CONTRIBUTION TOWARD SINGLE COVERAGE

% of Premium % of Employers 2009 2010 2011 2012

0-9% of Premium 31% 35% 31% 26% 10-19% of Premium 28% 29% 27% 34% 20-29% of Premium 22% 22% 21% 20% 30-39% of Premium 9% 12% 13% 10% 40-49% of Premium 3% 2% 3% 4%

Over 50% of Premium 7% 7% 5% 5%

Response RatioIncrease employee premium contributions for family coverage 53% Increase employee premium contributions for single coverage 49% Absorb the cost increase 42% Increase deductibles 33% Increase the amount employees pay for office visits 27% Increase the amount employees pay for prescription drug coverage 22% Increase employee maximum out-of-pocket expense 20% Change insurance carriers 17% Implement coinsurance 9% Add a HDHP with an HRA or HSA 7%

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Table 5 indicates the percentage of premium employees are expected to contribute to their dependent coverage. Almost 52% of employers expect employees to contribute more than 30% of the family premium rate. Table 5

EMPLOYEE CONTRIBUTION TOWARD DEPENDENT/FAMILY COVERAGE

% of Premium % of Premium 2009 2010 2011 2012

0-9% of Premium 9% 11% 8% 9% 10-19% of Premium 11% 18% 12% 10% 20-29% of Premium 29% 24% 27% 29% 30-39% of Premium 13% 17% 19% 14% 40-49% of Premium 10% 7% 10% 13%

Over 50% of Premium 28% 2% 23% 25% Of the employers surveyed, only 16% do not plan to pass on any percentage of the rate increase to their employees at their next renewal; nearly 49% plan to pass up to 25% of the increase to their employees. The remaining 35% of surveyed employers plan to pass some portion of the rate increase to their employees as they did in the prior year. PLAN COST vs. MERIT INCREASES We asked employers to indicate what their merit pay increase factor will be for 2012. Results indicate the estimated average will be 2.2%, up from 1.8% in 2011. However, the majority of employers expect to pass along a large percentage of the health insurance premium rate increase to their employees. This may result in more employees waiving health insurance coverage due to their inability to pay for this expense, thus potentially increasing the number of uninsured Colorado residents. When asked if they had considered medical cost sharing strategies based on salary/pay level, 84% of employers said they had not. INFLATION FACTORS Colorado employers were asked to rank the factors that contribute most to increases in their health plan costs. Table 6, on the next page, reflects the factors in order of importance from 1 to 10, with 1 being the highest. A new factor, “Insurer Profits,” was added for this survey though was ranked as the least impactful inflation factor. Consistent with prior years, physician charges are at or among the top drivers. Technology has moved up the rankings as an inflationary factor and ranks high next to hospital costs and higher utilization. Overall, health care delivery factors rank as the perceived dominant cost drivers while insurance-related factors (insurer profits, cost shifting, aging population) are ranked lower.

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Table 6

HEALTH PLAN COST INCREASE FACTORS

2005 2006 2007 2008 2009 2010 2011Prescription drug costs 1 1 2 3 2 3 1 Physician charges 5 4 5 4 4 7 2 Rising hospital costs 2 2 3 1 1 1 3 Technology 7 7 8 4 Higher utilization 3 3 1 2 3 5 5 Legal liability 6 6 6 5 6 6 6 Aging population 4 5 4 6 5 3 7 Mandated Coverages 8 2 8 Medicare/Medicaid cost shifting 7 7 7 8 9 9 9 Insurer profits 10

OTHER BENEFITS OFFERED We asked employers what other non-retirement benefits they offer to their employees. Dental (98%) is the most popular form of coverage offered to employees after medical coverage. Over 75% of the employers surveyed also offer a form of disability coverage, group life insurance, vision insurance, and a flexible benefit plan. See Chart 6 for more details on these and other lines of coverage. Chart 6

In addition to the benefits listed in Chart 6, 46% of the surveyed employers plan to offer their employees a wellness plan in 2012. This is an increase from the 42% reported in 2011. Wellness plans are expected to continue to be an important tool as employers struggle to control medical and other employee benefit plan costs.

14%

29%

68%

73%

75%

76%

87%

88%

94%

98%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Long-Term Care

Supplemental Medical Plans

Employee Assistance Plan

Short-Term Disability

Group Suppl/Voluntary Life

Vision

Flex Benefit Plan

Long-Term Disability

Group Life

Dental

ANCILLARY BENEFITS

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GENERAL INFORMATION In 2011, the number one source for information was the broker/consultant. We assume that this was primarily due to the need for information on health care reform. Employers consult the following resources for technical benefits questions:

♦ Broker/Consultant – 95% ♦ Mountain States Employers Council – 55% ♦ Insurance Carrier – 44% ♦ Human Resource Associations (SHRM/CHRA) – 30% ♦ Attorney – 28% ♦ Third-Party Administrator – 27% ♦ Publications – 23%

When asked about their top two concerns about external forces affecting their business

profitability in 2011, Colorado employers responded: ♦ Economy – 76% ♦ Politics/Regulatory environment – 35% ♦ Health care cost increases – 34% ♦ Health care reform – 29% ♦ Status of financial markets – 19% ♦ Shortage of qualified workers – 9% ♦ Taxes – 8% ♦ Foreign or local competition – 6% ♦ Energy prices – 5%

CONCLUSIONS The vast majority of employers report that senior management is only somewhat informed

about the impact of health care reform on their business. The impact of health care reform is one of the top four major concerns for employers.

Colorado employers estimate merit pay increases for 2012 will be approximately 2.2%. However, health premium increases are expected to be 6.5% (after plan changes) for the 2012 plan year. Many employers indicated they would pass on much of this premium increase to their employees in the form of higher premiums and reduced benefits. This may result in more employees waiving medical coverage due to costs and a perceived lower value of the benefit.

For the seventh consecutive year, employers’ number one cost containment strategy will be to

increase their employees’ premium contribution for family coverage. In fact, 53% of employers expect to increase the employees’ contribution for family coverage, which is a decrease from 60% in 2011.

Approximately 7% survey respondents will add a high deductible health plan option with an

HRA or HSA for the 2012 plan year, which is a decrease from 11% for the 2011 plan year. This is in addition to the 40% already offering such plans for the 2011 plan year. This increase in the number of employers with high deductible health plans is significant, an increase from 36% for the 2010 plan year.

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The majority of Colorado employers (53%) reported that they were only somewhat familiar with the concept of Health Insurance Exchanges. When asked if they were considering dropping their health plan when the Colorado Exchange becomes available in 2014, 56% said no and 3% said yes.

END NOTES Benefit Management & Design, Inc. conducted this survey from 2000 to 2004. Lockton Companies, which purchased Benefit Management & Design, Inc. in 2005, has continued to conduct this survey since 2005. Lockton is the world’s largest, privately-owned, independent insurance broker. Lockton’s Denver Office is one of Colorado’s largest insurance brokers. This survey is not a scientific survey with confidence factors or appropriate sample sizes. It is, however, a representation of employer attitudes regarding health insurance. Out of the 698 employers surveyed in 2011, 147 responded. This represents a 21% response rate. WHO IS LOCKTON?

Our Philosophy – “We Live Service!®” World’s largest, privately-owned, independent insurance broker Ninth largest insurance brokerage firm in the world Established in 1966 in Kansas City, MO $836 million in annual revenue (worldwide) 58 offices worldwide (North America, Europe, South America, Asia) 4,100+ associates worldwide 15,000+ clients around the world In Denver since 1979:

270 associates 55 in employee benefits consulting practice Health/Welfare Plans Retirement Plans Executive Benefits

Please contact Deb Smith, [email protected] or (303) 414-6151, if you have questions about this survey report. Lockton Companies, LLC 8110 E. Union Avenue, Suite 700 Denver, CO 80237 www.lockton.com

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To be the worldwide value and service leader in insurance brokerage, employee benefits, and risk management

Our Goal

To be the best place to do business and to work

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