Some Orange County businesses have been breathing a sigh of relief as they consider next year’s budgets for healthcare.
“We were expecting higher,” said Dan Nichols, human resources consultant for Santa Ana nonprofit Habitat for Humanity Orange County, which will pay an average of 4% more in premiums for its workers’ healthcare coverage in 2012.
Nichols said that Habitat saw a premium increase of 16% this year.
Habitat, which has 54 workers, offers a large range of plans to its workers. Aetna Inc. of Hartford, Conn., and Oakland-based nonprofit Kaiser Permanente, the largest HMO in Orange County—combine to offer its employees some 20 options.
Workers can choose “plans with a higher deductible (or) a lower deductible,” among other things, he said.
Habitat isn’t alone when it comes to getting a relative break on healthcare costs in 2012.
Aon Hewitt Inc., a Chicago-based human resources consulting company, recently released a study showing that the increase that employers in Orange County will pay toward health insurance premiums for their workers is expected to average 7.2%, or about $800 apiece, in 2012.
That would put the average cost per employee in Orange County at $10,811, according to Aon Hewitt. The expected increase here is slightly ahead of a 7% hike, to $10,475 per worker, expected nationally, according to the survey.
Smallest Hike Since ‘08
Aon Hewitt’s projected increase would be the smallest in Orange County since 2008, when businesses averaged a hike of 7%. It also would be down from this year’s increase, which came to an average of 9.1% here, according to the firm.
The smaller increase expected for 2012 appears to reflect some elements of the healthcare reform that became federal law in 2010 and has affected the market in phases ever since.
For example, a factor that affected premiums in 2011 was a reform-related requirement that parents be allowed to carry dependent children up to the age of 26 on coverage. Additional costs of carrying older children were priced into many plans.
The smaller increase expected next year should help local businesses in more ways than one.
“There’s definitely a sigh of relief on behalf of the clients,” said Kelly Moore, president of Irvine-based Moore Benefits Inc., which works with companies with 200 or fewer workers. “They have other things that they would like to worry about, and this is taking up far too much time.”
Some of Moore Benefits’ clients think that healthcare reform might even be helping keep increases down with a provision that require insurers to spend at least 80% of the premium dollars they collect on patient care, she said. That requirement goes up to 85% for larger groups.
Push on Pricing
Moore’s firm worked with Habitat on their insurance coverage and appears to have gotten a benefit of the new requirement with a push from Moore herself.
“I had three different carriers that released renewals to me—they had to take them back and re-issue lower rates,” Moore said. “They got a big increase last year … when we were doing our renewal education and open-enrollment meetings, it was not fun.”
Larger employers are seeing similar moderation on price hikes.
“Folks are seeing about what they did last year, at least our folks are,” said Karen Nixon, president of Nixon Benefits in Corona del Mar.
Nixon said that her clients with 100 to 750 employees were seeing average cost hikes of 6% to 9% starting in January.
“That’s with no plan change,” she said. “And just like the Hewitt study, we see em-ployers continuing to pass on the increase to their employees.”
Businesses can pass along costs either through requiring their workers to pay a larger share of their premium or higher co-payments, she said.
Another thing Nixon noticed is that many clients in the mid-range of 100 to 700 employees are sticking with HMOs, which mainly got their start in Southern California, an area where there are a lot of medical groups that are used to providing healthcare in a tightly paid environment.
Nixon also said that some of her with 500 to 10,000 workers, both in the area and out of state, are beginning to play in the “consumer-directed health plan market.”
Consumer-Directed
Consumer-directed health plans combine a high-deductible insurance policy with a health savings account. Under such plans, the employer will fund their workers’ health savings account up to the amount of the deductible, which generally runs $1,000 or more.
“More employers are now funding health savings accounts,” she said.
