Small businesses across West Michigan can generally expect to pay moderately more for employee health coverage next year.
State regulators recently approved 2017 rates that average 2.6 percent higher for the 19 health plans in Michigan that serve the small-group market for companies with two to 49 employees.
Blue Cross Blue Shield of Michigan — which dominates the small-group market in Michigan with about a two-thirds market share in 2016 — received approval from the Michigan Department of Insurance and Financial Services for an average 2.6-percent increase. HMO subsidiary Blue Care Network got the OK for an average increase of 3.6 percent.
Grand Rapids-based Priority Health, the second-largest player in the small-group market with a 9-percent market share, received approval for an average 5.2-percent increase for policies that comply with the Affordable Care Act and renew on Jan. 1. Priority Health Insurance Co., which sells fully-insured policies, is putting an average 6.2-percent increase in place.
Actual premiums may differ widely from the statewide average for small employers based on their ratings.
The highest proposed rate adjustment in the state was 15 percent by Federated Mutual Insurance Co., which this year had nearly 6,800 people enrolled in small-group policies, according to a state summary of rate proposals filed last spring. On the other end of the scale, Detroit-based Health Alliance Plan sought approval for a 5.6-percent average decrease for 2017 policies.
The rates approved for 2017 are consistent with the renewals Shannon Enders, a partner at Lakeshore Employee Benefits in Muskegon, has been delivering to his small-group clients for policies that start on Dec. 1 this year or Jan. 1, 2017. They’ve been coming in around the mid to high single-digit range before employers adjust benefits packages to mitigate cost increases, Enders said.
Rates for a few clients “are actually negative and going down,” he said.
Mid-sized employers with 50 to 99 employees are seeing similar increases for policy renewals, although with “more volatility” than the small-group market, said Enders, who cautions that companies shouldn’t necessarily gauge themselves to the average because there are so many variables that go into setting rates.
“There are no average customers. There are customers getting much worse or much better,” he said. “There are winners and losers.”
Some companies, for instance, have seen “massive” increases for policy renewals after Blue Cross Blue Shield changed its underwriting methods for the mid-group market, Enders said.
SHIFTING TO HIGHER DEDUCTIBLES
Nationally, more than 600 large companies that responded to an annual survey of health benefits by Willis Towers Watson PLC reported an average increase of 5 percent for 2016 premiums and expect another 5-percent increase for 2017.
Across West Michigan this year, employers of all sizes that responded to the annual cost survey by The Employers’ Association pay an average monthly premium of $1,342 for a family policy, or $15,744 for the year. Employees on average now cover 24 percent of the family plan premium, according to The Employers’ Association survey results.
The monthly premium for a two-person plan this year is $1,035, or $12,420 for the year, and a one-person plan costs $475 per month, or $5,700 annually.
The average premiums are across all product lines — HMOs, PPO, point-of-service and HSA-based health plans — and are based on data submitted by 97 association members who responded to this year’s survey.
As with past annual surveys, the 2016 results show respondents are making regular benefits changes to mitigate rising costs by shifting more to employees through premium sharing and higher copays and deductibles.
“The plan features are changing so much and they’re tweaking this and tweaking that,” said Maggie McPhee, director of information services at The Employers’ Association. “People are getting very creative and they’re looking at every aspect of their plan to figure out how they can contain and control costs.”
Part of the shift in recent years has been a steady march to high-deductible health plans.
For this year, 15 percent of the employers responding to The Employers’ Association survey had a deductible of $501 to $1,000 built into a family health plan for in-network care. Meanwhile, 47 percent used a family deductible of $1,001 to $3,000. Another 18 percent of family plans had deductibles that ranged from $3,001 to $5,000, and 13 percent had deductibles of $5,000 or more.
As the cost of health coverage has increased continually over the years, employers also are offering more options from which employees can choose.
Where years ago the tendency was to offer a single benefits package and maybe a second option, they now provide multiple options with varying deductibles and copays. The higher the deductible, the lower the premium; the lower deductible plans have a higher premium.
“There is not one straight plan anymore,” said McPhee, noting that the tendency of employers to offer multiple policy options makes it difficult to compare year-to-year change in premiums across the market.
‘A CHOICE CULTURE’
The trend toward offering more choices emerged as many employers transitioned to high-deductible plans in recent years but retained a lower-deductible option for employees who are willing to pay a higher price because, for example, they may have a chronic medical condition that needs ongoing care, Enders said. Most of his clients who have more than 10 employees offer multiple benefits options.
As employers pass on more of the costs for health coverage, they can offer their employees multiple plan options with varying benefit levels, deductibles and copays to at least provide them some choice on what to buy, based on their personal circumstances and how much the company contributes to the premium.
“Many employers have said, ‘I’m not their mom. I don’t have to pick one plan for them. Here’s how much money we’re going to give you and you make the decision for yourself,’” Enders said. “We’re a choice culture. It’s employees and employers wanting choice. It just seems to sell better.”
As small employers continually work to contain the costs of health coverage, Enders also sees more of them considering self-funding their plans. He has one client with a half-dozen employees who has a version of self-funded health benefits plan.
“That was unheard of a few years ago,” Enders said.
Editor’s Note: This story has been changed to note the average increase for Priority Health policies that comply with the ACA is 5.2 percent, not 6.9 percent as originally reported.