Health care costs are rising for employers, but many hesitate to cut benefits
Health care costs are rising for employers, but many hesitate to cut benefits
We have just entered open enrollment for many health care plans as well as the Affordable Care Act, or “Obamacare,” exchanges.
A lot of us are therefore likely to be crunching numbers to figure out how much our health insurance premiums will set us back next year. Employers carefully calculate what kind of plans they offer, how much they’ll pay for and which benefits are covered — or aren’t.
As of September, employers were paying 3.4% more for health care than they were paying a year earlier. That’s according to the employment cost index that the Bureau of Labor Statistics released last week.
Higher costs for labor, expensive new drugs and services being added to plans —these are just some of the factors driving up the numbers. And as much as patients hate higher premiums, they are tough for businesses as well.
Especially small businesses, said Richard Trent, executive director of the advocacy group Main Street Alliance.
“When small-business owners have to contend with these elevated prices, it means that’s money they’re spending that they could be spending elsewhere,” Trent said.
New employees, additional equipment, “it eats into profit margins. It also impacts things like recruiting and retaining top-tier talent,” Trent said.
Because in a tight labor market, the health plan you offer can be a big factor in convincing someone to work for you.
But if the labor market softens, employers will have more leeway to cut their health care spending.
“Employer costs may go down if employers decide, ‘I can really offer less generous coverage,'” said Kosali Simon, a health economist at Indiana University, Bloomington. “But when I’m using health insurance as a way to recruit and retain my workers, I have to be careful in how much I use those kind of tools.”
A lot of small businesses seem hesitant to cut benefits, and 49% told the National Federation of Independent Business that they just took a hit to company profits and ate rising health care costs.
But 46% raised prices on their goods or services, and 18% said they’ve shifted more of the cost to employees.
“Over a five-year period, health insurance premiums are growing roughly on par with inflation and workers’ earnings,” said Matthew Rae, an associate director at KFF, which regularly surveys employers about the total cost of their health care plans for them and their employees.
“The average family health insurance plan now costs over $25,000, which is just a lot of money, no matter which way you cut it,” he added.
But, Rae said, the share that employees have to chip in has been growing relatively slowly compared to the past.
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