Most Companies Paying at Least 5 Percent More for Health Insurance Premiums in 2016; 1 in 4 Incurring Double-Digit Increases

Published Tuesday, October 4, 2016 3:00 pm

ITASCA, Ill., Aug. 10, 2016 – A survey of more than 3,000 U.S. employers reports that 54 percent are paying at least 5 percent more for employee medical insurance this year, with nearly one in four suffering from increases of at least 10 percent. Yet a decisive 67 percent agree that medical and pharmacy benefits are the cornerstone of their employee benefits package, and therefore an important tool to recruit and retain talent in a tightening labor market.


These findings are part of the 2016 Arthur J. Gallagher & Co. (Gallagher) Benefits Strategy & Benchmarking Survey, one of the largest and most comprehensive benefit surveys of its kind, spanning multiple industries, geographic regions and workforce sizes. The annual study covers major benefit categories including human capital strategies; medical; wellness; employee communications and engagement; dental; life insurance; long-term care and voluntary; leaves and disability; and retirement.


"Healthcare is the primary focus of cost-control efforts because it’s the majority of an employer’s benefits spend," said James W. Durkin, Jr., President, Gallagher Benefit Services, Inc. "Employers should be deliberate about the changes they make to preserve the benefits most coveted by existing employees. Becoming a destination employer requires an open mindset about new and emerging options for curtailing healthcare costs. This approach enables companies to redeploy those funds into other employee-centric benefits that are a differentiator in the ongoing war for talent."


Employers Experimenting with Care Delivery and Funding


Resolved to maximize the value of their human capital investments in the face of intensified cost pressure and ongoing competition for talent, more employers are moving toward combining traditional healthcare options with newer, more innovative approaches. Several newer approaches are poised for significant growth by 2018.



  • Telemedicine, now used by 24 percent of employers to provide employees with quick access to affordable care, is predicted to reach 42 percent.

  • Narrow network healthcare plans that limit the number of providers, preferably based on quality of care and cost-effective outcomes, show a growth trend from 18 percent to 27 percent.

  • Consumer-directed health plan survey findings forecast a rise in adoption from 36 to 51 percent.

  • Self-insuring, another increasingly popular method of reducing costs, is expected to grow from 28 to 38 percent.


Employers are also exploring less common options to rein in costs. Some use defined contribution arrangements to give employees a set amount of funds to buy their own insurance – and access to a private exchange. Although fewer than 5 percent of employers have adopted these arrangements, that figure is expected to triple by 2018.


Many Employers Would Likely Benefit from Improved Strategic Planning


Gallagher’s recent best-in-class analysis found that employers that excel at healthcare cost management take a comprehensive, data-driven and multi-year approach to compensation and benefits planning. According to survey findings, however, just 8 percent of employers use a multi-year planning process with multiple data inputs while three-quarters (76 percent) plan their benefits year-to-year, putting them in a reactive position and less able to manage costs.


Gallagher Offers Employers Insights and Strategic Advice


"It’s important for organizations to recognize that the increasing global competition for talent has both top-line and bottom-line implications. A wholly integrated human capital strategy can provide the solutions, structure and reliability that employers need to attract, engage and retain talent, manage rising healthcare costs and other expenses, and strengthen their market position," Durkin said.