Public employers pay three times more toward employee benefits than do private employers.
Jacksonville-based Coordinated Benefits Group reports that UBA 2013 Health Plan Survey findings indicate that while private sector employees are absorbing more costs for their own health care, facing high deductibles and large out-of-pocket cost increases in recent years, they are also bearing more as taxpayers by assuming a higher percentage of costs for employees who work in the public sector.
The survey finds that public employer cost per employee increased 22 percent from $7,001 in 2012 to $8,551 in 2013, while employer cost in the private sector increased 15.8 percent from $5,226 in 2012 to $6,040 in 2013. The portion an employee pays decreased for both during that same time period, but by nearly 30 percent (or $1,025) for a public worker and only 15.7 percent for a private worker. Taxpayers, therefore, assumed an additional $1,681 or 24.28 percent of a public employee’s health care cost.
Findings from the comprehensive survey of more than 11,000 employers show that the private sector has controlled costs better than public employers by using plan designs that shift more up-front cost to employees—a strategy proven to decrease total cost.
Such plans, known as consumer-driven health plans (CDHPs), grew from 22.5 percent to 24.1 percent of all plan types offered across all industries and size groups. A majority of public plans, however, are still considered “Cadillac plans,” rich in costly benefits that have been stripped from most private plans – putting the public sector at risk of facing the forthcoming “Cadillac Tax.”
Under the Patient Protection and Affordable Care Act (PPACA), plans that cost more than $10,200 for individuals and more than $27,500 for families will face a 40 percent tax on the amount over the threshold.
“When the ‘Cadillac Tax’ takes affect in 2018, almost all local and state governments will face huge penalties unless they get their costs under control,” says Steve DeSorbo, president of Coordinated Benefits Group. “For example, the average municipality in Illinois and Massachusetts will pay $5,000 per employee in 2018. By 2020, the penalty for family coverage will skyrocket to $9,202 in Illinois and $19,699 in Massachusetts. Unfortunately, those penalties are passed to taxpayers facing their own health care cost increases.”
Health Plan Design Differences in Public versus Private Sector:
- Private employees with dependents have been hit hardest. The average annual premium (employee contribution) has increased by 1.5 percent since 2012 and 19.7 percent since 2009. A public worker, however, actually saw their annual contribution for dependents decrease by 3.05 percent from $4,716 in 2012 to $4,572 in 2013.
- Total Cost of Employer-Sponsored Health Plans has increased at a rate of 21 percent, on average, for both public and private industry for the past five years; however, the private sector has better controlled costs in recent years. Annual Total Cost for the public sector increased from $10,356 in 2012 to $10,914 in 2013, a 5.4 percent increase. In the private sector, however, Annual Total Cost increased 2.8 percent in the same time period, from $9,032 to $9,282 in 2013.
- Out of Pocket Maximums (OOP) are higher in the private sector, with the average worker facing an in-network OOP maximum of $3,721 for a single adult and $8,258 for a family, versus a public sector worker who faces an in-network OOP maximum of $2,262 for a single adult and $6,032 for dependents. The differences in out-of-network OOP maximums is even greater, with a private worker facing a family maximum nearly $5,000 higher than that of a public worker.
- Deductibles are another area where private employees face higher up front costs. The average in-network deductible for a public employee in 2013 was $1,356 for a single adult and $3,064 for a family; a private employee will pay $1,891 for a single adult and $4,323 for a family, a nearly 40 percent difference for each.
- Average in-network co-insurance dropped from 90 percent to 82.5 percent for private employees, but remained at 90 percent for the public sector.
“The Government Sector has always been much more generous with benefits,” DeSorbo says. “As for wages, despite the deficits they were running, various reports have shown that public sector pay has outpaced private in recent years, even during the recession.
“Recent public pay freezes have slowed salary growth. However, public employers have made up for income loss to their employees by paying even more for both employee and dependent health care coverage, in comparison with the private sector.”
DeSorbo concludes, “Unless public employers get health care costs contained, the way the private sector has been forced to do, I am terrified of the crisis that they, and we, face in the near future.”
For more information, contact Coordinated Benefits Group at 904-281-0511 to request a copy of the 2013 UBA Health Plan Survey or for a customized benchmarking report.
About Coordinated Benefits Group
Based in Jacksonville, Fla., Coordinated Benefits Group (CBG) was started in 2000, but it’s principal Steve DeSorbo has been in the employee benefits field since 1981. CBG’s services and include Benefit Brokerage & Consulting, HR Consulting, Compliance Solutions & Affordable Care Act Advisory. More information is available at http://www.jaxbenefits.com/.
About the UBA Health Plan Survey
Data in the 2013 UBA Health Plan Survey is based on responses from 10,551 employers sponsoring 16,928 health plans nationwide. The survey’s focus is intended to provide a current snapshot of the nation’s employers rather than covered employees.
About United Benefit Advisors
United Benefit Advisors is an independent employee benefits advisory organization with more than 200 offices throughout the United States, Canada and the United Kingdom. UBA Partners collaborate with more than 2,200 professionals to deliver expertise, thought leadership and solutions that positively impact employers and affect the lives of their employees and families. Employers, advisors and industry-related organizations interested in more information can visit UBA online at http://www.UBAbenefits.com.