Study: Employee health contributions rise to highest level in years

Salaries for many Michiganders are a little lighter this year.

State companies increased employee health insurance contributions — the amount an employee pays for their own health plan — at the highest average rate in at least five years, according to the state’s Employee Benefits Benchmarking Study. 2023 of benefits consultancy Marsh McLennan’s Troy agency was released on Friday.

The increase in employee contributions comes from companies seeking relief from general and health care inflation after three years of suspending contribution increases during the pandemic as a tool to attract and contain.

“Companies are asking employees to contribute more of their own money across the board,” said Drew Higgerson, vice president of health and benefits at Marsh McLennan. “Employee contributions from 2022 to 2023 increased 5 to 10 percent. What we saw in 2020 was that the employee world was shaken up in every shape and form, so companies maintained the status quo by keeping contributions relatively flat. Now, in 2023, with overall inflation rising and health care inflation rising in recent years, something had to give.”

The largest increases were recorded in family insurance plans.

Employee contributions to Health Maintenance Organization (HMO) plans have risen to an average of $429 a month, up 10.3% from 2022, according to the study. This is the largest percentage increase since 2015.

Family Preferred Provider Organization (PPO) contributions rose to a monthly average of $541, a 6.5 percent increase from 2022 and the largest increase since 2016.

Individual HMO contributions rose to a monthly average of $124 this year, a 6.9% increase but less than last year’s percentage increase of 7.4%. Individual PPO contributions increased an average of 5% to $167, compared to last year’s percentage increase of 3.2%.

Contributions for high-deductible health plans, called direct-to-consumer health plans, remained largely unchanged for individual (0% increase) and family (2% increase) plans.

Some of that flatness may come from the fact that more people are dropping out of their high-deductible health plan, Higgerson said.

High deductible plans are defined as having a large cash amount that users pay out of pocket at the beginning of the year, and if that deductible is met, most health care services are covered for the remainder of the year.

“High-deductible plans have died for the first time ever,” Higgerson said. “Sometimes these plans lock people out of the healthcare experience. People have realized they are exposed to the full cost of the plan until they hit their deductible and are now wondering if that makes sense versus an option PPO where they have a variety of co-pays.”

Higgerson suggests that rising costs of all things have led people to adjust their health care plans to spread costs more evenly.

But the pain employees feel in their paychecks is unlikely to go away anytime soon. The reality is that the costs of health care benefits have not risen with inflation, either in general or in the costs of providing health care.

The cost of benefits per employee increased 5.4% in 2023, compared to 3.2% in 2022. The inflation rate in the US was 8.26% last year.

Higgerson believes benefit costs will recover over the next few years.

“Healthcare inflation has almost always outpaced regular inflation,” Higgerson said. “We’re really watching closely what happens. We’ve only seen it happen once or twice before, but it always bounces back quickly. The end result is after a four-year average of just 5.3% (in increasing health benefit costs), the next few years will likely see significant increases.”

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