Health insurance and benefits can be a bit esoteric, so I’m going to start this post with an object lesson from Halloween.
If you think of the annual enrollment period when Hoosier workers sign up for a new year of health benefits as a giant exercise in trick-or-treat, then the goodies Indiana employers hand out are a couple of M&Ms short of a full bag.
What makes me say that? The latest version of the annual employer health benefits survey conducted by Indianapolis-based United Benefit Advisors, a network of health insurance brokers around the country. The results are based on responses of 477 companies in Indiana, and more than 18,000 nationwide.
Indiana companies surveyed are requiring their employees to contribute a larger percentage toward their health insurance than employers in the rest of the Midwest and have instituted higher deductibles on those plans than in neighboring states.
Hoosiers contributed, on average, $3,512 each year toward the premiums of their health plans, according to UBA. That’s about $360 a year, or $30 per month, more than what workers around the Midwest contribute even though wages are higher on average in the Midwest than in Indiana.
Hoosiers who have traditional PPO plans face deductibles that are 50 percent higher for single coverage and 33 percent higher for family coverage. That’s an extra $500 to $1,000 of exposure for those types of plans.
Those differences exist even though the cost of that insurance is nearly identical in Indiana as the average cost across what UBA calls the North Central region—which stretches from Wisconsin to West Virginia and western Pennsylvania, and includes Illinois, Kentucky, Michigan and Ohio in between. I’ll simply call that region the Midwest for the rest of this post.
Those who know health benefits well will respond, as I did, “Well, things are different in Indiana because so many employers and workers are using consumer-driven health plans. “Those are health plans with high deductibles and either a health savings account or health reimbursement account.
Indeed, 48 percent of the workers covered by the Indiana firms surveyed by UBA are in consumer-directed health plans—which is more than double the percentage in the Midwest and nationally.
And as I wrote earlier this year, that high percentage in Indiana has the state on the tipping point for creating a true market for health care services.
But even though Indiana employers like consumer-directed health plans, they don’t like to contribute a ton of money to their workers’ savings accounts.
This year, Indiana employers on average contributed $894 into their workers’ health savings accounts or health reimbursement accounts of their workers who had single coverage. That was 24 percent less than contributed by employers around the Midwest and 34 percent less than contributed by employers nationally.
So what makes Hoosier employers so cheap?
Indiana companies might want to say they are disproportionately burdened by high prices from hospitals and doctors. It’s absolutely true, as I’ve noted extensively, that hospital systems are more expensive in Indiana compared with surrounding states. There’s ample evidence for that.
Higher health care prices are certainly part of the reason why Indiana employers and their workers are both spending nearly 6 percent more for health insurance than their peers nationally, according to the UBA survey.
But employers’ costs depend on at least two other things: 1) how many medical services their workers receive, as well as what those services cost. In Indiana, with Hoosiers’ health ranking poorly on numerous fronts, more people need more of the higher-priced services than in other states; 2) the generosity of each employer's health plan; in other words, how much of those medical services the health plan pays for and how much it leaves for workers to pay out-of-pocket.
The combination of those factors caused the average annual cost of employer health plans to be almost identical in Indiana as in the Midwest.
The average amount spent on health insurance in Indiana was $10,290 this year, according to the UBA survey. Around the Midwest, the average cost for health insurance was $10,390.
A better explanation is lower wages.
Average annual wages in Indiana were $41,470 last year, according to the Bureau of Labor Statistics. That’s 6.9 percent lower than the average in the rest of the states in UBA’s North Central region, which I’m calling the Midwest.
That’s remarkably similar to the 6.7 percent less that Hoosier employers contribute toward their workers’ health benefits than their peers across the Midwest.
However, those are far smaller differences than the yawning difference in contributions to health savings accounts and health reimbursement accounts.
Since benefits are just another form of compensation, it makes sense that the two would move in tandem. Since jobs, on the whole, pay less in Indiana than in other states, it makes sense that the value of benefits provided to workers would also be a bit less.
We Hoosiers like to explain the differences in our lower wages by noting how the cost of living is less in Indiana.
But when it comes to health care, things aren't cheaper here. Due to high prices and poor health, Hoosiers’ health spending higher than their fellow Americans and on par with their fellow Midwesterners.
I did one last calculation, dividing the average amount employees contribute to their health benefits by the average wage. Nationwide and in the Midwest, it’s 7 percent. But in Indiana, it’s 8.5 percent.
If Indiana were like the rest of the nation on that metric, each Hoosier worker would be paying nearly $600 less per year--$49 less per month—for health benefits.
And their insurance plans would kick in $500 to $1,000 sooner.
So not only are Hoosiers making less money, they’re spending more of what they do get on health care. Health care is taking a candy bar or two out of our financial treat bags every year.