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Group health plan costs expected to continue modest growth

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Group health insurance premiums are rising modestly, with only slightly higher increases expected next year, according to a survey released Tuesday by Towers Watson & Co. and the National Business Group on Health.

The survey of nearly 500 employers — 75% of which have at least 5,000 employees — conducted from June through July found that the health plan cost per employee rose just 4.1% to an average of $12,041 per employee this year, up from $11,567 last year. That compares with an average cost increase of 4.9% in 2014 and 4.2% in 2013.

The 2015 increase is in line with those reported in other recent surveys. For example, a Kaiser Family Foundation survey of nearly 2,000 employers released last month found that the average premium for family coverage rose an average of 4.2% this year, while the average premium for single coverage increased an average of 3.8%.

Looking ahead, cost increases in 2016 will be modest compared to those in the first few years after the turn of the century, when they typically rose by double digits annually, according to the survey.

In 2016, employers expect plan costs per employee to increase by an average of 5%.

“By and large, employers have done a good job managing costs in recent years,” Randy Abbott, a Towers Watson senior consultant in Boston, said in a statement.

Employers have taken a variety of steps to control health plan costs. More than 70% of surveyed employers said they now offer high-deductible health care plans linked to health savings accounts. That high-deductible feature, which shifts more costs to employees, reduces plan costs often by as much as 20%, numerous surveys have found.

Employers are taking other steps to control costs. The Towers Watson-NBGH survey found that 27% of respondents said they have added a special premium surcharge for employees who include working spouses who are eligible for coverage from their own employers.

In addition, 20% of surveyed employers use a so-called defined contribution plan strategy. Under such a strategy — a key feature of private health insurance exchanges — an employer will limit its premium contribution toward plan coverage to a fixed amount. If an employee chooses a more expensive plan, the employee will have to pay the difference between the employer contribution and the plan's premium. That gives employees a powerful incentive to select lower-cost plans.