Published on March 7, 2014

Employers expect slight uptick in 2014 group health plan costs

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Healthcare

By Jerry Geisel, Crain News Service

CHICAGO (March 7, 2014) — Group healthcare plan costs paid by employers will bump up a bit this year, but still will be lower than increases in recent years, according to a new survey.

Employers responding to a National Business Group on Health/Towers Watson & Co. survey are projecting their costs will rise to an average of $9,560 per employee in 2014, an increase of 4.4 percent from $9,157 in 2013. While that’s higher compared with 2013’s average cost increase of 4.1 percent, the increase is well under the nearly 6 percent annual hike cost increase averaged from 2009 through 2012.

Account-based plans more popular

That easing of healthcare plan inflation comes as employers have moved aggressively in adopting new strategies and designs to better keep costs in check, according to the survey, which was released March 6.

For example, nearly three-quarters of employers now offer employees account-based plans, while 9 percent of employers in 2014 expect to add such plans, in which health savings accounts or health reimbursement arrangements are linked to a high-deductible health insurance plan. The plans, because of their high deductibles, are much less costly than more traditional plans, while giving employees strong financial incentives—greater exposure to costs and the opportunity to build up their accounts—to use healthcare services carefully.

And some employers have embraced account-based plans more strongly. Nearly 16 percent of employers now offer account-based plans as their only plan design, up from just 7 percent as recently as 2012.

Employers are taking other steps to control costs. For example, nearly one-quarter of respondents use premium surcharges—averaging $100 per month—in situations where employees’ spouses are eligible for coverage elsewhere but decline it.

In addition, more employers are expected to eliminate coverage to pre-Medicare-eligible retirees. Nearly two-thirds of employers that provide such coverage say they are likely to eliminate the plans in the next few years and steer the retirees to public exchanges, where, if their incomes are less than 400 percent of the federal poverty level, they would be eligible for federal premium subsidies.

Surveyed results are based on the responses or 595 employers with 7.8 million employees enrolled in their healthcare plans.

This report appeared on the website of Crain’s Business Insurance magazine, a Chicago-based sister publication of Tire Business.

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