Continued health plan design changes keep down group plan costs

Employers curbed group health care cost growth to a modest 3.8% this year, according to a national survey released Thursday by Mercer L.L.C.

In 2015, group health care costs rose to an average $11,635 per employee, compared with $11,204 last year, the survey of nearly 2,500 employers showed.

This year's 3.8% increase marks the third straight year of increases below 4.0%, Mercer said in a statement announcing the results.

“Employers really are attacking health care cost growth on so many different fronts,” said Beth Umland, Mercer's New York-based director of research for health and benefits.

Large employers with 500 or more employees fared better, as they tend to be self-insured and have more resources to focus on controlling health care cost growth, Ms. Umland said. Those companies saw costs grow by 2.9% on average.

For small employers with 10 to 499 workers, health care costs grew faster at an average 5.9%, according to the survey.

A combination of strategies, including shifting workers to high deductible health plans, implementing wellness programs and providing consumerism tools, like cost comparison tools, have helped employers keep cost growth in check, Mercer said.

They “have made a concerted effort to add programs that help people either improve their health status, or at a minimum, maintain it,” explained Tracy Watts, Mercer's national leader for health reform in Washington. “While we have seen people moving into plans that require more cost shifting, there are many more tools available today to help people take care of themselves and to help them shop more effectively for the care that they need,” she said.

In 2016, employers predict the cost per employee will rise an average 4.3% after actions are taken to reduce costs. If no changes are made to their current plans, employers estimate costs would increase 6.3%, Mercer said.

But the difference between this year's cost growth and 4.3% is not significant, and employers tend to estimate high, Ms. Umland said.

The Looming Cadillac Tax

While many employers were implementing strategies to control health benefit cost growth long before the “Cadillac” tax became a threat, it has “accelerated a lot of the processes that were already in place,” Ms. Umland said.

“It gives you a deadline,” she said. “We are seeing an acceleration especially around the shift to consumer-directed plans, and then along with that the different programs that help make a consumer-directed plan a better choice for employees.”

The Cadillac tax refers to the 40% excise tax on premiums that exceed $10,200 for single overage and $27,500 for family coverage that is to begin in 2018.

According to the survey, 23% of large employers have at least one plan that will trigger the tax in 2018 if no changes are made between now and then. That compares with Mercer's prediction of 33% last year, but employers have since made changes to slow cost growth.

Other findings in Mercer's survey include:

• Enrollment in consumer-directed health plans among large employers nearly doubled in the past three years from 15% to 28% of covered employees. For all employers, enrollment climbed to 25%, up from 23% the previous year, according to the survey.

• Thirty percent of large employers offer telemedicine services as a low-cost alternative to a medical office visit for nonacute care, up from 18% in 2014, Mercer said.

• The percentage of small employers planning to stop offering health coverage dropped to 7%, down from 15% last year and 21% in 2013. Only 5% of large employers say they are likely to drop their health plans, a slight increase from last year's 4%, Mercer said.