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October 02, 2013 02:00 AM

Healthcare plan costs expected to rise 4.8% in 2014: Survey

Crain News Service
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    By Jerry Geisel, Crain News Service

    CHICAGO (Oct. 2, 2013) — After making healthcare plan design changes, employers are expecting plan costs to increase by an average of 4.8 percent per employee in 2014, according to preliminary results of a Mercer L.L.C. survey released Oct. 1.

    That increase is only slightly higher than the 4.1 percent average rise in costs Mercer found in its 2012 survey, which was the smallest cost increase in 15 years.

    More results from the Mercer 2013 survey will be released this year. The company attributes the relatively modest increases in healthcare costs during the past few years to several factors, including the sluggish economy, which has dampened utilization. At the same time, many employers have implemented sweeping design changes, such as moving to less costly high-deductible consumer-driven healthcare plans (CDHP).

    For example, in 2012, the cost of medical coverage through a CDHP linked to a health savings account (HAS) averaged $7,883 per employee compared with an average cost of $10,007 per employee for coverage through a preferred provider organization.

    "Employers have made fundamental changes in their health benefit programs in recent years that have put the brakes on unsustainable cost growth," Beth Umland, Mercer's director of research for health and benefits in New York, said in a statement.

    In fact, without making design and other changes to their plans, costs per employee would rise by an average of 7 percent per employee next year, according to the survey.

    Provisions in the healthcare reform law, though, could mean big increases in total healthcare plan costs in the future for some employers.

    Under a provision that takes effect in 2015, employers with at least 50 full-time employees—defined as those working an average of at least 30 hours per week—will either have to offer qualified coverage to those employees or pay a $2,000 penalty for each full-time employee, minus 30 employees.

    To avoid that penalty, 11 percent of employers with at least 500 employees will reduce hours worked by at least a portion of their workforce to below the 30-hour threshold, Mercer said.

    "But most employers affected by the rule will simply open their plans to all employees working 30 hours per week and brace for rising enrollment," Mercer said.

    The results of the Mercer survey are based on about 2,000 employers who responded by Sept. 10. The results are not weighted and represent only early responders. The final results will be based on responses from about 2,800 employers and will be weighted to be nationally projectable, Mercer said.

    __________________________________________

    This report appeared in Business Insurance magazine, a Chicago-based sister publication of Tire Business.

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