When deciding what to do with your company’s employee-sponsored health plan, it helps to know what other companies are doing. A recently released national survey of employer-sponsored health plans may provide just that perspective.
The detailed report, compiled by Mercer, the international consulting firm with an office at 1 University Square, at the corner of Alexander Road and Route 1, surveyed nearly 3,000 employers around the country.
On Thursday, May 1, at 8:30 a.m., Kevin Carmelengo, a principal at Mercer Health & Benefits’ Morristown office, will discuss the findings of the report at a continental breakfast at 1 University Square, Suite 100, with the Human Resource Managers Association of Princeton. The event is $15 for HRMA members and $20 for nonmembers. For more information on the forum, visit hrma-nj.shrm.org. Carmelengo, who has a bachelor of science degree in business management from Seton Hall University, has more than 25 years of experience in the industry.
Mercer is part of Marsh & McLennan, the New York-based global professional services firm with offices in more than 100 countries. Other Marsh & McLennan companies at 1 University Square include Oliver Wyman, Marsh Financial Services, and Axis Global Accident & Health, formed in response to the market dislocation following the 2001 World Trade Center attacks, which killed more than 300 Marsh & McLennan corporate staff and business associates at the World Trade Center.
The survey of employer-sponsored health plans found that slow cost growth continued in 2013 as employers took action in anticipation of new cost pressures that will arise over the next few years from health care reform provisions. According to the survey growth in the average total health benefit cost per employee slowed from 4.1 percent in 2012 to just 2.1 percent in 2013. Cost averaged $10,779 per employee in 2013; this includes employer and employee contributions for medical, dental, and other health coverage.
But employers expect that the rate of growth in the per-employee cost of coverage will rebound next year, to 5.2 percent. This increase reflects changes they will make to reduce cost; if they made no changes to the current plans, they estimate that cost would rise by an average of 8.0 percent.
Mercer’s annual national survey includes public and private organizations with 10 or more employees. In 2013 2,842 employers responded.
While cost growth has slowed among employers of all sizes, it was lowest for small employers in 2013. Among those with 10-499 employees, average cost rose by only about 1 percent, while among very large employers — those with 5,000 or more employees — it rose 3.7 percent. Small employers shifted cost to employees in 2013 with higher deductibles, which helped to hold down cost: the average PPO in-network individual deductible jumped 15 percent in 2013, to reach $1,663. Large employers focused on building enrollment in low-cost consumer-directed health plans and improving employee health management programs.
Many employers anticipate spending more to cover more employees in 2014. The ACA mandate requiring all individuals to obtain coverage or face a tax penalty goes into effect in 2014. Currently, 22 percent 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 percent elect dependent coverage. But next year, because of the individual mandate, it is 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 employers say they will take steps to control growth in enrollment, most commonly by increasing the employee contribution for dependent coverage (18 percent) or employee-only coverage (10 percent). Some already impose a surcharge on premium contributions for spouses who have other coverage available (9 percent of large employers) or even make them ineligible for coverage (7 percent of large employers); it seems likely that these provisions will become more common next year.
The majority of large employers believe that higher enrollments and new fees will boost their benefit spending in 2014. The median amount of the increase predicted is 3.5 percent, although some employers (13 percent) expect their spending on health benefits to increase by more than 10 percent.
Workforce health management, or “wellness,” is one of employers’ top strategies for controlling health spending. While most employers believe that health management programs are making a difference, proving that remains a challenge for many. The largest employers are the most likely to have formally measured the return on investment of their health management programs (46 percent of employers with 20,000 or more employees). Nearly nine out of ten of these employers say that their programs have had a positive impact on medical plan trend.
Perhaps because they are seeing results, employers are increasingly willing to invest in the success of these programs. Over half of large employers with health management programs now use financial incentives to encourage higher participation: 52 percent, up from 48 percent in 2012 and 33 percent in 2011 These incentives are often substantial. Among employers that offer lower premium contributions to employees completing a health assessment, the median reduction in the annual contribution required for employee-only coverage is $250. In addition, a growing number of employers are providing incentives for achieving desired outcomes, instead of (or in addition to) incentives for participating in programs. In 2013 20 percent of large employers used outcomes-based incentives, up from 18 percent in 2012.
Consistent with results from Mercer’s past four annual surveys, in 2013 few large employers — just 6 percent of those with 500 or more employees — believe it is likely that they will terminate their employee health plans within the next five years and send employees to the public health insurance exchanges. But the portion of small employers that say it is likely they will terminate their plans within five years jumped from 22 percent in 2012 to 31 percent in 2013.
In 2015 employers with 50 or more workers will be required to extend coverage to all employees working 30 or more hours per week. About a third of all large employers (500 or more employees) will be affected by this rule (32 percent), and among wholesale/retail organizations, which have large part-time populations, nearly half will be affected (48 percent).
In the Mercer survey 23 percent of large employers (up from 19 percent in 2012) varied the employee contribution amount based on tobacco-use status or provided other incentives to encourage employees not to use tobacco. Among employers with 20,000 or more employees, 46 percent now use an incentive.
The survey shows that 22 percent of large employers offer an ongoing plan to retirees under age 65, down from 24 percent, and just 17 percent offer a plan to Medicare-eligible employees (unchanged from 2012).
The full report on the Mercer survey, including a separate appendix of tables of responses broken out by employer size, region and industry, can be purchased at the company’s website, www.mercer.com/ushealthplansurvey. The report alone costs $600; the report and accompanying tables costs $1,200.