Health Benefit Costs: Calm Before the Storm?

HEALTH BENEFIT COSTS: CALM BEFORE THE STORM? US health benefit cost growth slowed again in 2013 as employers took action in anticipation of new cost pressures that will arise over the next few years from health care reform provisions. But Mercer's National Survey of Employer-Sponsored Health Plans found that employers expect the rate of growth in the per-employee cost of coverage to rebound in 2014. Mercer's nationally projectable annual survey includes public and private organizations with 10 or more employees; 2,842 employers responded in 2013. HEALTH BENEFIT COST GROWTH TAKES A DIP Growth in the average total health benefit cost per employee slowed to 2.1% in 2013, Mercer's research shows. However, US employers expect that rate to rebound to 5.2% next year. This increase reflects changes employers will make to reduce cost; if they made no changes to their current plans, they estimate that cost would rise by an average of 8.0% in 2014. GROWTH IN AVERAGE TOTAL HEALTH BENEFIT COST PER EMPLOYEE 2010 6.9% 2011 6.1% 2012 4.1% 2013 2.1% 2014 5.2%* * Projected Source: Mercer National Survey of Employer-Sponsored Health Plans TOTAL HEALTH BENEFIT COST PER EMPLOYEE NEARS $11,000 Total health benefit cost per employee averaged $10,779 in 2013, Mercer reports. This includes employer and employee contributions for medical, dental, and other health coverage. Low increases among small employers helped to slow overall cost growth. Among employers with 5,000 or more employees, cost rose 3.7%. Health benefit cost per employee in 2013 Percentage increase from 2012 2.1% 0.8% 2.5% 3.7% $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 All Small All large Employers with 5,000 employers (10 or more employees) employers (10-499 employees) employers (500 or more or more employees) employees Source: Mercer National Survey of Employer-Sponsored Health Plans HIGHER ENROLLMENT COULD BOOST BENEFIT SPENDING Many US employers anticipate that enrollment growth in 2014 will result in more spending (in addition to any growth in the cost of coverage). The ACA mandate requiring individuals to obtain coverage or face a tax penalty goes into effect in 2014. Currently, among employers with 500 or more employees, 18% 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 coverage. Next year, it is likely that fewer employees will waive coverage and more will elect dependent coverage. ESTIMATED 2014 INCREASE IN BENEFIT SPENDING ATTRIBUTED TO THE ACA, AMONG EMPLOYERS WITH 500 OR MORE EMPLOYEES 34% No increase in Don't know 2014 due to ACA 29% Increase of less than 5% 13% 16% Increase of Increase of 5-10% more than 10% Source: Mercer National Survey of Employer-Sponsored Health Plans USE OF CDHPS CONTINUES TO CLIMB Consumer-directed health plans are an important option for employers looking for a low-cost plan to make extending coverage to additional employees more affordable. While the use of CDHPS has been rising steadily among employers of all sizes, Mercer notes it is likely to accelerate over the next three years. Enrollment in CDHPS is now on par with that of HMOS. WHO'S OFFERING CDHPS Very likely by 2016 2010 2011 2012 2013 Small employers 16% 20% 22% 23% 34% Large employers (500 or more employees) 23% 32% 36% 39% 64% Employers with 5,000 or more employees |42% 45% 51% 55% |78% PERCENTAGE OF ALL COVERED EMPLOYEES ENROLLED BY PLAN TYPE IN 2013 18% 18% 64% CDHP HMO PPO/POS* * Includes a small percentage of traditional indemnity plans (less than 1%) Source: Mercer National Survey of Employer-Sponsored Health Plans STAYING IN THE GAME Consistent with results from Mercer's past surveys, in 2013 few large employers say it is likely that they will terminate their employee health plans within the next five years and send employees to the public health insurance exchanges. However, the smallest employers are increasingly likely to say they will drop their plans within five years. PERCENTAGE OF US EMPLOYERS WHO SAY THEY ARE LIKELY OR VERY LIKELY TO TERMINATE PLANS WITHIN FIVE YEARS 2011 2012 2013 500+ employees 9% 7% 6% 200-499 employees 13% 12% 12% 50-199 employees 13% 20% 23% 10-49 employees | 22% 23% 34% Source: Mercer National Survey of Employer-Sponsored Health Plans $10,779- ......... 1666$ $11,277 $11,254