Health benefit costs in the United States continued to slow in 2013 as employers took action in anticipation of new expenditures that will arise over the next few years from healthcare reform provisions.
According to Mercer’s National Survey of Employer-Sponsored Health Plans, growth in the average total health benefit cost per employee slowed to just 2.1% in 2013 from 4.1% in 2012. Cost averaged US$10,779 per employee in 2013. This includes employer and employee contributions for medical, dental and other health coverage.
But companies expect that the rate of growth in the per-employee cost of coverage will jump next year to 5.2%. This increase reflects changes they will make to reduce costs. If no changes were made to current plans, companies estimate that cost would rise by an average of 8%.
“The good news is that employers have already taken decisive action to slow cost growth so they will be in a better position to handle the challenges ahead,” says Julio A. Portalatin, president and CEO of Mercer. “But the impact of the [Affordable Care Act (ACA)] on enrollment levels remains a huge question mark.”
Many employers anticipate spending more to cover more employees in 2014. The ACA mandate that requires all individuals to obtain coverage or face a tax penalty goes into effect in 2014.
Currently, 22% of an employer’s eligible employees, on average, waive coverage for themselves, either because they are covered under another plan or because they choose to go without. Among employees who do enroll, on average, 53% elect dependent coverage.
But next year, because of the individual mandate, it’s likely that fewer employees will waive coverage for themselves and more will elect dependent coverage—although the extent of the change is difficult to predict.
Some large companies say they will take steps to control growth in enrollment, mainly by increasing the employee contribution for dependent coverage (18%) or employee-only coverage (10%). Some already impose a surcharge on premium contributions for spouses who have other coverage available (9% of large employers) or even make them ineligible for coverage (7% of large employers). These provisions will become more common next year, according to Mercer.
Most large employers believe that higher enrollments and new fees will increase their benefit spending in 2014. The median amount of the increase predicted is 3.5%, although some employers expect their spending on health benefits to increase by more than 10%.
The study also shows that while most employers believe that health management programs are making a difference, proving return on investment (ROI) remains difficult for many. The largest employers are the most likely to have formally measured the ROI of their health management programs (46% of employers with 20,000 or more employees).
The survey covers public and private organizations with 10 or more employees. It polled 2,842 employers.
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