National Labor Office: Environmental Assessment

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Health Benefits Trends 
The average cost of healthcare benefits for employees rose by 9.2 percent in 2005, lower than the  11.2 percent increase in 2004, and the first year in the past 4 not to record double-digit increases.  
For 2006, most consultants expect increases in retirees’ premium contributions, co-payments  or coinsurance for prescription drugs, increased deductibles for healthcare services and out-of-pocket limits on retirees’ obligations. We may also see a growing trend toward offering high deductible health plans (HDHP), and consumer driven health plans (CDHPs). Interestingly, the Kaiser Survey reports that16 percent of employers believe these plan offerings are “very effective” in controlling healthcare costs. In contrast, 18 percent of respondents are expected to change their plan design so retirees pay 100 percent of costs.  
The 2005 Hewitt and Associates Report states that as employee contributions and costs increase, so will employer reactions to increases. ¹ This is important to the NLO because as premiums increase, employers’ reactions will continue to move toward alternative programs that shift costs to the employee.

Employees’ contributions (2006)

•  20 percent of the overall health premium or 3.6 percent annual salary increase equating to 23 percent of the increases used to pay healthcare premiums and out-of-pocket expenses.

Consumer Directed Health Plans (CDHPs) — Employers’ reactions to increases 

Offering CDHP
	— Build your own designs
	— HRA/HSAs
Implementing/contracting with health plans offering health risk management programs, wellness  and prevention programs
	— Manage chronic health conditions and promoting health and wellness programs
	— Offering financial incentives for employees to participate in wellness programs
Requiring more quality data and price transparency
	— Hospitals and providers must have a solid record of quality (efficiency, outcomes, cost, information/data)
Changing prescription drug coverage
New strategies and plans
	— Higher coinsurance and co-payments
	— Low cost substitutions and mail order for certain therapeutics including more generous “generic design” programs

The NLO must work with the market to develop programs that meet employer needs. Complementing the data described above, we provide a chart documenting the growth in healthcare spending accounts across the workforce. While the implementation of HSAs continues to grow at a slower rate across unions, the use of flexible benefits, dependent care accounts, and HRAs continues to increase. In fact, 39 percent of union workers have access to pre-taxed benefits such as HRAs.  

Click here for a full report (PDF) on the environmental assessment offered through the National Labor Office.