Rising Healthcare Costs and the Emerging Trends to Help Mitigate Them
December 6, 2016
Whether you’re in the hospitality, construction, healthcare, or manufacturing industry, the rising cost of healthcare continues to be at the forefront of each respective industry’s budget process. Within manufacturing, increasing healthcare costs is the number one concern just ahead of unfavorable business conditions according to the most recent survey from the National Association of Manufacturers. Manufacturing business owners all share this concern, but also realize that offering attractive benefits is necessary to keep up in an increasingly competitive job market. Considering some of the answers from the latest NAM Outlook Survey below, the concern is justified, and the issues appear to be escalating each year:
- Respondents anticipate premiums to increase by 7.9 percent on average over the next 12 months, with nearly one-third reporting gains of at least 10 percent.
- If health insurance premiums continue to increase at the rate of the past 15 years, manufacturers’ premiums could potentially rise to $17,845 per family under their plan in 2015, an increase of more than $1,300 per policy in a single year.
- The employee benefits tax (i.e. Cadillac tax) will go into effect in 2018, imposing a 40 percent surcharge on benefits exceeding $10,200 for an individual and $27,500 for a family.
- If costs continue to increase at the historically average rate, the standard plan for a manufacturing sector employee would fall under the Cadillac tax by 2024. If the tax is left in place, then it will affect nearly every manufacturing employee benefits package within the next decade.
With these potential increases in mind, many manufacturers have been exploring flexible healthcare options. An emerging trend observed in this space has been implementing a Health Savings Account (HSA) plan. “For the 2016 plan year, employees at manufacturing companies selected an HDHP [high deductible health plan] over a traditional plan 46 percent of the time” (Benefitfocus). Based on these results, manufacturing employers have an opportunity to encourage their employees to opt for HSAs or flexible spending accounts (FSAs) to cover HDHPs’ higher out-of-pocket expenses.
An HSA enables employees to use tax-free money for medical expenses with no tax or penalty while using the funds. This has allowed employers to save money on their healthcare costs, while still providing high-quality benefits to their employees. An HSA can help manufacturers get a grasp on the rising costs of healthcare, while also providing a tax advantage savings account to the employee, which results in increased employee retention/attraction.
HSA Benefits:
- HSA contributions are exempt from federal and most state taxes
- HSA assets can earn interest and be invested
- HSA allows roll over year to year – no “use it or lose it” penalty
- HSA assets are the property of the account holder and not the employer
- HSA assets are portable – employees keep their HSA when they change jobs or leave a company
- HSA assets are spent on qualified medical expenses
- Your HSA account will have a debit card that you can use to pay bills or pharmaceuticals
- Employers, employees, and individuals can all contribute to an HSA account
While the manufacturing industry is facing some serious challenges in the coming years, there are emerging trends that will help you regain control of your total healthcare spend. When applied mindfully in an appropriate context, these strategies can mitigate the future increases. To get started exploring which options are available to your organization, contact your Parker, Smith & Feek account team.
SOURCES CITED:
http://www.nam.org/Data-and-Reports/Manufacturers-Outlook-Survey/2016-Manufacturers–Outlook-Survey—Third-Quarter/
http://www.nam.org/Data-and-Reports/Reports/Shaping-Up/Shaping-Up-Executive-Summary.pdf
https://www.benefitfocus.com/sites/default/files/media/pdfs/Benefitfocus-2016-State-of-Employee-Benefits-Industry-Edition.pdf
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