According to a recently released study by Aon Hewitt, increases in employer healthcare costs were their lowest in almost 20 years at 3.2%. But the numbers do not look as good when employee costs are included which is rising at an alarming rate. As more costs are borne by employees, it puts them in a difficult position of managing their benefits budget which should include retirement and other insurance protection.
In 2015, employees contributed $2490 to pay their premium plus $2208 for out of pocket costs compared to $2001 combined in 2005, a whopping 134% increase. High deductible healthcare plans (HDHC) are now the 2nd most popular plan with 16% used by companies and another 41% considering them along with reduced dependent subsidies and unitized pricing.
The National Center for Policy Analysis looking for the bright side for employees commented, “Americans should not bemoan the growth in out-of-pocket costs. It simply means we have more direct control of a greater share of our health care costs.”
Just as companies offloaded costs and liability in retirement plans when moving from a DB (defined benefit) to DC (defined contribution plan like a 401(k) and 403(b) plan), they are beginning the same process for healthcare. 401(k)s were designed to be a savings supplement augmenting DB plans and Social Security – they have become the main retirement savings vehicles for middle America. It looks like HSAs could be the equivalent of 401(k) plans for healthcare costs.
The shift in healthcare costs along with the ACA have accelerated the DC-ization of healthcare benefits. Learning a lesson from retirement plans, employers should help employees to not just make sure that there are getting the best value for their money, even if the company is not paying, and they should consider helping them manage to the best outcome for themselves and their family as well as balancing their benefits budget. The convergence of benefits and managing the budget will only become more important to employers and their workers.
