Public sector health insurance costs grew at twice the rate of the private sector this year, with taxpayers covering a large chunk and set to cover more if those high costs remain in the coming era of the Cadillac tax, according to a new survey.
Per employee costs in the public sector increased 22 percent in 2013, from an average of $7,000 in 2012 to $8,551, while private sector costs increased 15.8 percent from $5,226 to $6,040, according to United Benefit Advisors' annual survey of 11,000 employers.
Even with more high deductible plans in the private sector compared to just a few weeks ago, employee portions of the costs actually decreased at many public and private sector employers, by about 30 percent on average for public workers and 15 percent for private sector workers. According to UBA, that cost-sharing decrease at public employers translates into an additional $1,681 per employee that taxpayers assumed in 2013.
The findings leave Thom Manga, UBA CEO, with the conclusion that "the private sector has controlled costs better than public employers by using plan designs that shift more up-front cost to a strategy proven to decrease total cost."
These consumer-driven health plans grew from 22 percent to 24 percent of all plan types across industries and group sizes, according to the study. Meanwhile, in the public sector, a majority of plans are still considered "Cadillac plans," putting public employers in the unique position of facing the Affordable Care Act's excise for plans exceeding $10,200 annually for individuals.
"When the 'Cadillac tax' takes effect in 2018, almost all local and state governments will face huge penalties unless they get their costs under control," Manga said in a media release.
The UBA estimates that the average municipality in Illinois and Massachusetts will have to pay a tax of $5,000 per employee in 2018 -- and then more than $9,000 by 2020.
"Unfortunately, those penalties are passed to taxpayers facing their own healthcare cost increases," Magan added. "Unless public employers get healthcare 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 both the private and public sector, UBA found that total costs for employer-sponsored health plans grew 21 percent over the past five years. In both out-of-pocket maximums and deductibles, private sector workers have faced higher costs, although they're not too far apart.
The average private sector out-of-pocket maximum was $3,721 for a single adult and $8,258 for a family in 2013, compared to $2,262 for a single adult and $6,032 for dependents in the public sector, according to UBA. Average in-network deductibles for the private sector were $1,891 for single adults and $4,323 for a family, compared to $1,356 for single public employees and $3,064 for their families families.