The financial condition of many multiemployer health plans improved between 2006 and 2015, despite the challenges of increasing health benefit costs and a rising number of covered retirees. The The Multiemployer Health Plan Landscape: A Ten-Year Look (2006-2015), the second annual report in a series, shows that the ratio of active to retiree participants decreased during the ten-year period, making it increasingly difficult for trustees to manage financial shortfalls for retirees. In addition, health benefit costs rose consistently, spurring increases in both employer and worker/retiree contributions.
Plans in the Study
- The total number of multiemployer health plans in the study declined steadily from 1,811 for the 2006 plan year to 1,594 in 2015.
- The majority of health plans—ranging from 52.1% to 59.0% during the ten-year period—offer dental, vision and life benefits in addition to health benefits.
- Of the plans in this study, 60% are in the construction industry, 13.7% in the transportation industry, 7.2% in the retail and wholesale industry, and 6.9% in the manufacturing industry.
- Health plans may cover active participants, retired participants or both. The majority of plans—ranging from 68.9% to 71.9% over the ten-year period—cover both active and retired participants, while more than one-quarter of all plans—ranging from 26.8% to 28.9% between 2006 and 2015—cover only active participants. The percentage of multiemployer health plans covering retirees has increased slightly over the decade, from 71.1% to 73.2%.
- The plans in the study cover more than five million active and retired participants. Focusing on larger plans, 6.0% have at least 10,000 participants, while 2.4% have at least 20,000. Conversely, one-half (50.5%) of plans have fewer than 1,000 participants, nearly one-third (32%) have fewer than 500 participants and 6.4% have fewer than 100 participants. The median number of plan participants is 873, while the average number of plan participants is 3,250.
- The plans in the study reported more than 210,000 contributing employers. Among larger plans, 5.5% have at least 500 employers, 2.2% have at least 1,000 employers, and 0.5% have 2,000 employers or more. More than two in five (42.5%) have fewer than 50 employers, and 24.8% have fewer than 25 contributing employers. The median number of employers is 41, while the average number of employers is 150.
- Demographics are a key factor in the long-term sustainability of a health plan. In general, it is better for plan health to have a higher proportion of younger, working participants than older, retired participants. Despite the slight decrease in the number of plans, the number of participants has remained relatively stable, dipping to as low as 4.6 million in 2011 and peaking at 5.3 million in 2008.
- Although the overall total participant counts have remained largely unchanged, the mix of actives and retirees has shifted. In 2012, the number of retired participants increased by 34.0% from 805,799 in 2011 to 1,079,958. The retired participant count remained at a similar level through 2014 but declined 5.1% in 2015.
- Plan demographics also were analyzed as a ratio of active to retired participants. At the end of the 2006 plan year, the ratio was 4.78. In other words, there were 48 active participants to every ten retired participants. In 2008, the median ratio peaked at 4.96, and then it declined, reaching its lowest point of 3.84 in 2011. By the end of 2015, the median ratio had risen back up to 4.38.
- Benefit costs include claims for self-funded benefits and premiums for fully insured benefits. Operating expenses include administrative expenses, professional fees, and legally required taxes and fees.These costs were analyzed on a per participant per year (PPPY) basis. Focusing on highest cost plans first, 18.2% of plans have PPPY costs exceeding $14,000, 8.7% have PPPY costs above $16,000 and 4.5% have costs exceeding $18,000. Conversely, 14.6% have PPPY costs of less than $6,000, and 9% have costs below $4,000. Only 5.4% of plans have costs below $2,000.
- Median benefit costs have increased each year during the past decade. The median benefit cost was $6,760 PPPY in 2006 and increased to $10,479 in 2015.
- The highest PPPY median benefit cost increases were experienced in 2008 and 2009 (8.1% and 9.5% respectively). The lowest median benefit cost increase was experienced in 2013 (0.6%), while the 2015 increase of 4.8% was in line with the ten-year average of 4.9%.
- Changes in benefit costs could result from a number of factors, including fluctuations in the providers’ underlying costs, variations in utilization levels or patterns by participants, new health care services or products offered, or changes in the demographics of the participants covered by the plans.
- The income of multiemployer health plans can be broken into four components: employer contributions, worker/ retiree contributions, investment income and other income. Employer contributions, which represent the largest source of income, are made on behalf of a participant if all eligibility criteria are met.
- Focusing on employer contributions, 5.3% of plans have PPPY employer contributions above $18,000, while 3.0% have employer contributions that exceed $20,000. Conversely, 14.4% have PPPY employer contributions below $6,000, and 8.7% have contributions of less than $4,000. As of 2015, the median PPPY employer contribution is $10,249, while the average employer cost is $10,618.
- Moving on to worker/retiree contributions, 6.5% of plans have PPPY contributions above $2,000, 2.8% have PPPY worker/retiree contributions above $3,000, and 1.8% have contributions above $4,000. About two in five (39.4%) plans have PPPY worker/retiree contributions below $500, while 27.5% have PPPY worker/retiree contributions below $250. As of 2015, the median PPPY worker/retiree contribution is $423, while the average worker/retiree contribution is larger at $851.
- Investment and other income was positive each year except 2008, although 2015 experienced a decline compared with more recent levels. Average expenses PPPY increased from 2006 to 2007, dipped in 2008 and then increased each year from 2009 to 2015.
Plan Cash Flows
- To the extent that income exceeds expenses in a given plan year, the financial status of the plan is expected to improve. If income falls short of plan expenses, the financial status of the plan will likely deteriorate. Aggregate income has increased over the past decade, from $37.3 billion in 2006 to $52.4 billion in 2015. At the same time, expenses also have increased over the past decade, from $32.2 billion in 2006 to $50.1 billion in 2015.
- Net cash flows were positive from 2006 to 2007 before dropping to -0.9% in 2008. Net cash flows rebounded beginning in 2009 and have been positive every year since, although cash flow levels as a percentage of end-of-year (EOY) assets from 2009 to 2015 have not reached the pre-2008 level. While net cash flows as a percentage of assets increased from 2011 to 2014, 2015 experienced a decline to 2011 levels.
Learn More About Multiemployer Health Plans
Access the full report to see the complete findings: The Multiemployer Health Plan Landscape: A Ten-Year Look (2006-2015).
Justin Held, CEBS
Senior Research Analyst at the International Foundation