As insurance costs continue to rise, employers are passing more of the cost on to employees. Recently, the Kaiser Family Foundation Health Research & Educational Trust published its 2015 annual Employer Health Benefit Survey in which it indicated that the average monthly employee contribution is $89 for single medical coverage ($1,071 annually) and $413 for family medical coverage ($4,955 annually). Just three years ago the same report found the average monthly employee contribution was $79 for single medical coverage ($951 annually) and $360 for family medical coverage ($4,316 annually). As insurance costs continue to rise, employers need to look at employee cost share as part of their overall benefit strategy. There are many options for employers to choose but the following are the most popular in the central Pennsylvania area:
Percentage Cost Share
This is the most popular cost share option. Employers typically utilize a percentage cost share based on the fully-insured premium or COBRA rates to set employee contribution rates. The employee cost share for single employee coverage ranges from 10 percent to 50 percent (majority of employers utilize 20 percent).
A defined contribution plan limits the employer’s exposure on a yearly basis. The employer agrees to pay a specific amount per coverage tier (single, two-party, family …) and the employee pays the difference through cost share based on the level of coverage they choose.
Under employee-only coverage the employer covers all or a large portion of employee-single coverage and does not contribute any dollars toward dependents (although they are allowed on the plan). Under Health Care Reform, there is no requirement to cover spouses and dependents can be charged the entire premium.
Tiered Employee Cost Share Based on Salary
Tiered employee cost share based on employee salary is becoming a very popular alternative cost share strategy. Employers can use either a percentage of salary up to a maximum dollar amount or stratify a percentage cost with a salary range. This approach is particularly useful now that Health Care Reform requires that plans be affordable (no more than 9.5 percent of wages on employees’ W2). Under a tiered approach, employers can guarantee that the plans remain affordable, especially for those members in the lower wage categories. Cost share strategies are an integral part of employers over all benefit package and employers should would with their benefit consultant to implement a program as part of an overall benefit strategy.