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The Plan’s costs exceed comparable health care design and financial benchmarks. In 2021, for instance, the Plan’s net employer cost – that is, the total cost of the Plan to the employer, minus monthly employee contributions in the form of premium payments – was more than 50 percent higher than the average net employer cost reported in two leading industry surveys. Additionally, key financial measures customarily used to evaluate the cost of health care benefits (i.e., actuarial value and total cost share) for the Plan are higher than the benchmarks.
This discrepancy is driven by low monthly employee contributions and cost-sharing requirements (i.e., copays, deductibles, coinsurance, and out-of-pocket maximums) that are inconsistent with market standards.
The actuarial value of health care benefits for a plan is the average percentage of health care costs paid by the plan. The remainder is the average percentage paid by members through point-of-sale cost-sharing.
In 2019, the Plan’s actuarial value was 90 percent – meaning that on average, members paid 10 percent of the total health care costs via cost-sharing and the Plan paid the remaining 90 percent. In 2022, the Plan’s actuarial value is projected to exceed 91 percent due to erosion caused by fixed-dollar cost-sharing provisions (discussed in more detail below). The benchmark survey average is about 85 percent.
Total cost share is the percentage split of total health care costs between an employer and members. This financial measure is based on monthly employee contributions and point-of-sale cost-sharing.
In 2019, the Plan’s total cost share was 77 percent – meaning that the railroads paid 77 percent of total health care costs and members paid 23 percent. In 2022, the Plan’s total cost share is projected to be approximately 80 percent. The benchmark is 66 percent.
Total health care cost has been increasing for decades. However, low monthly employee contributions and fixed cost-sharing requirements further escalate increases to the Plan’s actuarial value and the railroads’ total cost share each year.
