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Moderate health plan cost uptick predicted for 2016

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Employers expect health care plan cost increases next year to remain moderate, according to a Mercer L.L.C. survey released Wednesday.

On average, after design changes, employers predict that in 2016 group plan costs will rise by an average of 4.2%, just slightly more than last year's actual average cost increase of 3.9%.

In addition, employers expect lower average cost increases before design changes in 2016.

Employers predict average costs before plan design changes, such as raising plan deductibles and coinsurance requirements, to increase by an average of 6.4% in 2016, down from 7.1% employers projected for 2015.

That continuing moderation in cost increases will be welcomed by employers.

“While health benefit cost growth is still well above the (consumer price index), the good news — for employers and employees — is that employers don't have to try as much to get cost increases to a more reasonable level,” Tracy Watts, a Mercer senior partner and national health reform leader in Washington, said in a statement.

There are several strategies employers have deployed, with success, to keep plan cost increases at more moderate levels compared with the start of the decade, when double-digit annual cost increases — even after plan design changes — were the norm.

The biggest design change has been the introduction and now widespread adoption of high-deductible consumer-driven health care plans, whose costs are roughly 20% lower than more traditional plans.

For example, 41% of employers now offer a CDHP, with 25% of those responding to the Mercer survey saying they are considering adding a CDHP or taking steps to boost employee enrollment in an existing CDHP.

Through greater exposure to health expenses before plan coverage kicks in, CDHPs give employees a significant financial incentive to be better consumers of health care services, experts say.

“Consumers have more skin in the game than ever before,” said Beth Umland, Mercer's director of research for health and benefits in New York, in an interview.

Aside from helping their bottom line, employers have another powerful financial incentive to keep health care cost increases under control: a provision in the Affordable Care Act that effective in 2018 will impose a 40% federal excise tax on the portions of group plan premiums that exceed $10,200 for single coverage and $27,500 for family coverage.

“Employers see the coming of the excise tax. The tax accelerated the trend to get costs more under control,” Ms. Umland said.

Other steps more employers are taking include beefing up their wellness programs and adding telemedicine programs in which plan participants can call a toll-free number to get help from a medical professional — a far less costly alternative to going to an emergency room or even a traditional office visit.

“You are talking about a $40 charge rather than $125 for an office visit,” Ms. Umland said.

The survey findings are based on the responses of more than 1,200 employers who replied by Sept. 1. Complete survey findings, including how much group health care premiums increased in 2015, will be released later this year.