Source: United Benefit Advisors, LLC
The New York Times recently stirred up a media firestorm when it reported about Harvard University professors who were lambasting the health care increases they were facing this year.
Apparently, members of Harvard’s Faculty of Arts and Sciences voted overwhelmingly to oppose the changes that would result in increases to health care costs. In response, Harvard pointed the finger at the Patient Protection and Affordable Care Act (PPACA). Ironic when one considers these very same individuals have been advising the president and Congress on how to provide health benefits to the nation at a “reasonable cost.” In response, UBA CEO Les McPhearson said, “Harvard professors are now realizing what the rest of the country has been experiencing for years – namely, that the cost of health care continues to be a heavy financial burden for employers and employees. They may have fallen out of their ivory tower with their latest health care rate hikes, but they are still a long way from reality with deductibles, out-of-pocket maximums and copays 153.51%, 88.54%, and 26.09% lower, respectively, than the average worker.”
While most of us can sympathize with the financial pinch these Americans are feeling, most workers pay far more for much less coverage. UBA’s 2014 Health Plan Survey, which looks at 16,467 plans from nearly 10,000 employers, gives the most comprehensive look at the costs of health care to both employers and employees. The survey shows that what Harvard professors will be paying is far below the norm.
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While Harvard employees have an annual deductible of $250 for a single individual and $750 for a family, nationally, most workers have an in-network median deductible of $1,500 for single coverage and $4,000 for a family ($3,000 and $6,000 respectively for out-of-network median deductibles). Even by Massachusetts’s standards, Harvard employees are getting a good deal. Most Massachusetts workers have a median in-network deductible of $1,000 for single coverage and $2,500 for a family. Quite simply, low deductible plans, like the ones offered at Harvard, come at a cost. The higher the deductible, the cheaper the plan cost and vice versa. However, having employees pay deductibles and participate in cost-sharing can help promote responsibility on the employee when making health care choices, which can reduce misuse and ultimately reins in overall costs. Employers, like Harvard, simply cannot continue to carry the load of health care costs as the rates continue to escalate. As of 2013, health care costs were six times the consumer price index (CPI).
Harvard employees have it better when it comes to out-of-pocket limits as well. At Harvard, these limits are much lower than most employees have come to expect. Compare $1,500 for an individual and $4,500 for a family at Harvard to the national median in-network out-of-pocket limit of $3,500 for single and $8,000 for a family.
At the end of the day, Harvard is like so many employers today caught in the crossfire of PPACA and having to consider cost-saving measures to sustain the increase in health care costs. Whether a higher deductible plan, coinsurance, tiered or limited networks, employers have little choice but to consider cost-saving options in order to continue to offer health care to employees.
To see all the out-of-pocket costs facing most workers, see the chart below. For the latest health plan cost trends, read our press release with industry findings and download the UBA Health Plan Survey Executive Summary. To benchmark your plan to others in your region, industry or size bracket, contact a UBA Partner near you to run a custom benchmarking report.