With the labor market transitioning to accommodate for the influx of millennial workers, the health benefits market is also coming to terms with these changes.

Combined with broad changes to health benefits in recent years after the adoption of the Affordable Care Act (ACA), many employers have re-assessed their coverage plans. While many employees have opted into traditional coverage plans, many now look to health savings accounts (HSAs) as a solution.

So what is the current state of the health benefits market? ADP’s Annual Health Benefits Report provides us with insight.

The market is stable

Overall, the data in this year’s report suggests that employer-provided health care plans in the large employer market are stable. Seventy-six percent of those eligible chose to purchase benefits in 2016, and employers are effectively adjusting to changes mandated by the ACA.

Eligibility rates continue to rise, a 2.3 percent total increase from 2014 to 2016. Yet, changes in costs have been modest, and shifting demographics in the workforce are keeping the overall growth in cost per employee lower than in the past.

While most large employers have offered health benefits to their employees for years, and use some form of self-funding, many smaller employers see variations in premiums due to fewer options. Price stability may be the norm for larger employers, but smaller companies tend to fluctuate a bit more.

Premiums have risen, but are steadier than pre-2014

Now two years into the ACA era, it’s interesting to see how premiums have stabilized. Average monthly premiums rose 5 percent between 2014 and 2016, slow growth compared to the double-digit growth in previous decades.

The average employer contribution in 2016 was $672, or a 76 percent share of the coverage cost. On average, an employee pays 5 percent of his or her income in premiums, but those at the lower end of the pay scale contribute a higher percentage of income into their benefits. Premiums comprise 8.1 percent of income for those making under $20,000 per year, compared to 2.4 percent for those making over $120,000 per year.

Younger workers are staying on their parents’ plans

Participation levels are the lowest for workers under 26, decreasing 1.7 percent from 2014. This group had the highest increase in eligibility since 2014 (3.9 percent), but had the lowest participation rate by a wide margin (44 percent compared to 71 percent of those aged 26 to 34).

Younger employees who are able to stay on their parents’ health plan avoid separate health deductions, helping offset other financial burdens they may face as they enter the workforce. For larger employers who typically self-fund, the cost of adding a healthy young person to the risk pool is marginal. Across the board, it makes a great deal of economic sense.

More broadly, the demographic shifts in the workforce are having an effect on the health benefits market. While the average age of the total sample hasn’t changed that much, we are seeing that the age of the workforce is widening.

Many baby boomers are remaining in the workforce longer than expected. Combined with the growing number of millennials entering the workforce, employers are looking for ways to solve the issues that arise from these age distributions, whether it is determining how to communicate about benefits (email or paper) or designing benefits packages that suit a broad range of ages.

We know that the large employer segment of group health benefits has been an island of stability in the market. But even the large employer market segment is subject to emerging trends in healthcare that may drive premiums higher. Two recent surveys by the National Business Group on Health and Willis Towers Watson point to similar moderate health cost increases but note that this growth outpaces increases in economic indicators. They conclude that while these increases are also below historical averages, they outpace cost of living increases.

The market is stable now, but we must take note of how it compares to the broader economic situation. Taken with the demographic changes, it will be interesting to see how HSA plans change the way that younger employers purchase later in their lives and how this will set the tone for future employees.