The median cost of benefits for multiemployer health plans increased 4.7% from 2017 to 2018, reaching $11,642 per participant per year (PPPY), according to a new International Foundation report. The consistent increases in costs over the ten-year period required increases in employer and worker/retiree contributions.
There has been a shift in the demographics of these plans since 2009—The number of covered retirees decreased by 3% while active participants increased by 14%. The number of retirees has gone down over the last decade. However, because retired participants generally contribute less to plan assets than the cost of their benefits, plans with a higher number of retirees can make it difficult for trustees to manage the financial shortfall for these retired participants.
Despite these trends, the financial condition of many of the 1,500 multiemployer health plans has improved. These are among some of the key findings from The Multiemployer Health Plan Landscape: A Ten-Year Look (2009-2018), the fifth annual report in a series.
Here are ten key takeaways from the extensive report.
Plans in the Study
- The majority of health plans (71%) offer dental, vision and life benefits in addition to health benefits.
- Health plans may cover active participants, retired participants or both. The percentage of multiemployer health plans covering retirees increased slightly over the ten-year period from 72.7% to 73.2%.
- The median number of plan participants is 976, while the average number of plan participants is 3,468. In addition, the plans in the study reported having more than 200,000 contributing employers. The median number of employers is 46, and the average number of employers is 151.
- Demographics are a key factor in the long-term sustainability of a health plan. In general, a plan’s financial outlook should have a higher proportion of younger, working participants than older, retired participants. Although the overall total participant counts have remained largely unchanged, the mix of actives and retirees has shifted. Between 2011 and 2012, the number of retired participants increased by 34.0% (from 806,000 to 1,008,000). The retired participant count has remained at a similar level since then.
- The report also analyzed plan demographics as a ratio of active to retired participants. The median ratio of active to retired participants declined from 2009 to 2011, followed by increases through 2018. The 2018 ratio of 4.95 is greater than the 2009 ratio of 4.43.
- Median benefit costs have increased each year during the ten-year period. For 2018, the median PPPY cost is $11,642. The average cost is very similar—$11,603, a 4.7% increase from 2017.
- The financial intake, or income, of multiemployer health plans can be broken into four primary 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. The median plan’s PPPY employer contribution is $11,762, 4.9% higher compared to last year’s study. The average plan’s PPPY employer contribution is $12,043, or 4.3% higher compared to last year’s study.
Plan Cash Flows
- When income exceeds expenses in a given plan year, the plan’s financial status is expected to improve. Conversely, when income falls short of plan expenses, the plan’s financial status will likely deteriorate. Aggregate income has generally increased over the past decade, from $37.4 billion in 2009 to over $60 billion in 2017 and 2018. At the same time, expenses have also increased over the past decade, from $35.4 billion in 2009 to $56.9 billion in 2018. While income decreased slightly from 2017 to 2018, expenses continued to increase.
- Another way to evaluate the effects of positive or negative cash flows is to express the income and expenses on a PPPY basis as a ratio. The ratio of income to expenses has been above 1.00—meaning that income has exceeded expenses and cash flow has been positive—for every year in the past decade. More recently, the ratio fluctuated from 1.13 to 1.06 from 2017 to 2018.
- Plan assets are another measure of plan health (determined by how many months of expenses these assets can cover). A higher number of months indicates that the plan has a greater ability to withstand financial uncertainties including claim variability, changes in the total number covered, work levels and changes in the demographics of covered participants. The median level of assets measured as months of expenses is 14.3. The average level of assets measured as months of expenses is larger (24.8). This is an increase of a half month in the median level and a decrease of one-tenth of a month in the average level, compared to last year’s results.
Learn More About Multiemployer Health Plans
The Multiemployer Health Plan Landscape: A Ten-Year Look (2009-2018) is the fifth annual multiemployer health plan benchmarking report and is produced in partnership with Horizon Actuarial Services, LLC, and the International Foundation of Employee Benefit Plans. The comprehensive report covers the plan demographics, benefit costs, income and plan cash flows of multiemployer health plans—providing coverage from more than five million participants.