Colorado Community

Rising Costs Weigh on Employer Health Plans in Colorado

Aimee Sharp
Author | Shield HealthCare
01/18/17  11:42 AM PST

Originally published in the Denver Post, “Rising Costs Weigh on Employer Health Plans in Colorado” by Aldo Svaldi

Colorado employers expect health benefit costs will jump 7.6 percent on average next year, according to an annual survey from the Lockton Mountain West Benefit Group. But they say they’ll take measures to limit increases to 4.7 percent.

Lockton, a global commercial insurance brokerage, surveyed 280 Colorado employers last month about the health benefits inflation they face and how they plan to respond.

It’s a vital issue, given that more than half of state residents are covered under employer-sponsored plans.

“Colorado has one of the lowest unemployment rates in the country and benefits have become one of the differentiators in how employers can recruit and retain workers,” said Leo Tokar, an executive vice president with Lockton Mountain West and the author of the survey.

The increase for 2017 is slightly below the 8 percent pace reported for both 2015 and 2016, and much less than the annual increases of 11.8 percent to 18 percent reported between 2004 and 2011, according to earlier Lockton surveys.

Still, the 2017 increase is three times the local inflation rate and the region’s average pay increase.

Because of Colorado’s tight labor market, employers are challenged in how they pass on higher benefits costs. Last year,employers said they whittled an 8 percent increase to a 4.4 percent increase; they plan to absorb a larger share of the 2017 increase.

Faced with higher costs, employers can reduce benefits or require employees to shoulder a larger share of premium increases — at the risk of increasing defections to rival companies that provide more generous benefits.

Changing carriers is another cost-cutting option. At larger companies, so is self-funding, or taking on more of the financial risk of providing coverage. About 48 percent of employers are self-funding rather than handing everything over to an insurance carrier.

“More employers are looking at managing costs as a strategic multi-year process,” Tokar said. They are managing their health plans like other parts of the business and finding ways to save.

Read the Full Article at the Denver Post.