Although health benefit cost growth continued slowly in 2013, employers should not let their guard down yet as there is an anticipated cost increase for 2014. According to the National Survey of Employer-Sponsored Health Plans, conducted annually by Mercer, growth in the average total health benefit cost per employee slowed from 4.1 percent in 2012 to just 2.1 percent in 2013. Cost averaged $10,779 per employee in 2013; this includes employer and employee contributions for medical, dental, and other health coverage.
The slow cost growth of 2013 is reflective of action that employers took to prevent high rates. But, employers expect that the rate of growth in the per-employee cost of coverage will escalate next year to 5.2 percent if they do make changes to attempt cost reduction. If they make no changes to the current plans, employers estimate that cost would rise by an average of 8 percent.
While cost growth has slowed among employers of all sizes, it was lowest for small employers in 2013. Among those with 10-499 employees, average cost rose by only about 1 percent, while among very large employers – those with 5,000 or more employees – it rose 3.7 percent. Small employers shifted cost to employees in 2013 with higher deductibles, which helped to hold down cost: the average PPO in-network individual deductible jumped 15 percent in 2013, to reach $1,663. Large employers focused on building enrollment in low-cost consumer-directed health plans and improving employee health management programs.
Many employers anticipate an increase in spending in 2014, reflective of higher enrollment. The ACA mandate that requires all individuals to obtain coverage or face a tax penalty goes into effect in 2014. Currently, 22 percent of an employer’s eligible employees, on average, waive coverage for themselves, either because they are covered under another plan or because they choose to go without.
Some large employers say they will take steps to control growth in enrollment, most commonly by increasing the employee contribution for dependent coverage (18 percent) or employee-only coverage (10 percent). Some already impose a surcharge on premium contributions for spouses who have other coverage available (9 percent of large employers) or even make them ineligible for coverage (7 percent of large employers); it seems likely that these provisions will become more common next year.
Enrollment in consumer-directed health plans rose from 16 percent of covered employees in 2012 to 18 percent in 2013, which is the same portion that enrolled in HMOs. CDHPs are an important option for employers looking for a low-cost plan to make extending coverage to additional employees more affordable. The average cost of coverage in a CDHP paired with a tax-advantaged health savings account is 17 percent less than coverage in a PPO and 20 percent less than in an HMO: $8,482 per employee, compared to $10,196 for PPOs and $10,612 for HMOs.
Wellness programs are one of employer’s top strategies for controlling health spending, as nine out of ten of these employers say that their programs have had a positive impact on medical plan trend.
The full report on the Mercer survey, including a separate appendix of tables of responses broken out by employer size, region and industry, will be published in April 2014. For more information, visit www.mercer.com/ushealthplansurvey.
Benefit Costs are Up and Down – 12/20
