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Helped by the continuing growth of high-deductible plans, group health care plan costs this year rose by the lowest percentage in more than 15 years in 2013, according to a new survey by Mercer L.L.C.
In 2013, group health care plan costs increased 2.1% to an average of $10,779 per employee compared with $10,558 in 2012, according to the survey of more than 2,800 employers released Wednesday.
This year's increase is the smallest since 1997 and is sharply less than 2012, when costs increased an average of 4.1%; and 2011 and 2010, when costs rose an average of 6.1% and 6.9%, respectively.
“This is great news,” said Beth Umland, Mercer's director of research for health and benefits in New York, referring to the low percentage increase in plan costs.
The continuing slowdown in cost increases is due at least in part to the growth of consumer-driven health care plans. This year, 18% of employees were enrolled in CDHPs, up from 16% in 2012 and just 8% in 2008.
With CDHPs, in which a health savings account or health reimbursement arrangement is linked to a high-deductible plan, employers can significantly cut health costs because CDHPs cost about 20% less than traditional plans, such as preferred provider organization coverage.
For example, coverage through CDHPs in 2013 averaged $8,482 per employee, compared with $10,196 for PPOs and $10,612 for health maintenance organizations.
More cost-shifting to employees, especially among smaller employers — those with less than 500 employees — also helped to dampen group plan increases. For example, the average individual deductible for in-network services through a PPO offered by small employers climbed 15% in 2013 to an average of $1,663 per employee.
Higher deductibles, Ms. Umland noted, bring down the total cost of the plan, as well as makes employees more careful consumers of health care services.
“You have less utilization of services,” Ms. Umland said, referring to high-deductible plans.
Another factor holding down costs is greater use of health management programs, such as those that give employees financial incentives, like a cash payment or lower premiums, if they take certain action, such as completing health assessments, to increase the likelihood of early detection of medical problems.
For example, 52% of employers with at least 500 employees now give employees financial incentives to participate in their health management programs, nearly twice as many compared with 2010, according to the survey.
“Employers believe prevention works,” Ms. Umland said. In fact, among employers that have formally measured the return on investment of health management programs, nearly nine out of 10 say the programs have had a positive impact on health care costs, according to the survey.
Still, employers are not sanguine that this year's extraordinarily low cost increases will continue. In fact, respondents predict that costs will increase by an average of 5.2% in 2014.
Some of these costs will be driven by provisions in the health care reform law that takes effect next year. For example, in 2014, individuals will face a financial penalty if they do not enroll in a qualified plan. Because of the individual mandate, “it is likely that fewer employees will waive coverage for themselves and more will elect dependent coverage,” Mercer said.
Already, 9% of large employers impose a surcharge on premiums contributions for employees' spouses who have other coverage available, while 7% make them ineligible for coverage.
“It seems likely that these provisions will become more common next year,” Mercer said.
The survey also found that costs and cost increases vary significantly by region (see chart). For example, costs in 2013, increased by an average of 5.3% for large employers in the South, the highest percentage increase of any region. On the other hand, costs for large employers in the Midwest, where 26% of employees are enrolled in CDHPs, the highest percentage of any region, fell by 0.1% in 2013.