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ACA in Flux, But Employer Plans Hold Steady

In contrast to the turmoil in the individual health plan market, employer health plan sponsors extended their run of low annual cost increases in 2017, according to a new survey of 2,481 public and private employers with at least 10 employees.

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The Mercer National Survey of Employer-Sponsored Health Plans 2017, the largest of its kind, reports that average total health benefit cost per employee rose by 2.6% in 2017. That follows a similar increase of 2.4% in 2016. Cost growth has averaged just 3.3% annually over the past 5 years, compared to 6.2% over the prior 5-year period. Notably, the survey revealed that low-cost growth was achieved without significant new migration of employees into high-deductible plans.

Despite this moderate growth, health coverage represents an enormous expense for employers. Total health benefits cost averages $12,229 per employee, or 14% of total payroll, in 2017. Even among smaller employers (those with 10-499 employees), whose benefits are typically less generous, health benefit cost averages $11,527 per employee. High cost affects employees as well as employers: In 2017, employees are paying, on average, 24% of the total cost of coverage through paycheck deductions.

“The high cost of healthcare poses major challenges to employers and their employees,” said Sharon Cunninghis, quoted in a press release; Cunninghis leads Mercer’s Health business in the U.S. “We’re helping employers gain ground on some of their biggest cost drivers by such means as addressing chronic conditions with enhanced care management, and targeting double-digit spending growth on specialty drugs with a suite of pharmacy solutions. When you reduce cost by improving quality, that’s a win-win.” 

Employee contributions as a percentage of premium have been stable for decades, Mercer says. But over the past 10 years, employers have given employees more responsibility for cost at the point of service, both by raising deductibles and by adding high-deductible consumer-directed health plans (CDHPs) with Health Savings Accounts (HSAs).

In 2017, deductibles in traditional PPO plans continued to rise, reaching nearly $1,000 on average for employers with 500 or more employees and nearly $2,000 for those with 10-499 employees.

Surprisingly, after years of steady growth, enrollment in CDHPs rose only by a single percentage point this year, from 29% to 30% of all covered employees. One reason may be simply that many employers already offer these plans, and therefore new implementations have slowed.

But in addition, only 10% of employers with 500 or more employees offer a CDHP as the only plan at their largest worksite. Five years ago, in 2012, when 6% offered a CDHP as the only plan, it was thought this strategy would spread more quickly. Most often, these mid-sized and large employers offer a CDHP alongside other medical plan options—typically higher-cost plans with richer benefits.

To help consumers make more informed healthcare decisions, 82% of employers with 500 or more employees now provide a “transparency tool”, an online resource to help members compare the prices—and in some cases, the quality ratings—of different healthcare providers

For more information, visit www.mercer.com/health-benefit-trends.