Mercer, November 14, 2012
Decisive action by employers in 2012 – in particular, moving more employees into low-cost consumer-directed health plans and beefing up health management programs – was rewarded with the lowest average annual cost increase since 1997. According to the National Survey of Employer-Sponsored Health Plans, conducted annually by Mercer and released today, growth in the average total health benefit cost per employee slowed from 6.1% last year to just 4.1% in 2012. Cost averaged $10,558 per employee in 2012.
With a growing number of employers now positioning a high-deductible, account-based consumer-directed health plan as their primary plan – or even their only plan – employee enrollment jumped from 13% to 16% of all covered employees in 2012. Many employers see these plans as central to their response to health care reform provisions that will raise enrollment. Over the past two years, offerings of CDHPs have risen from 17% to 22% of all employers, and from 23% to 36% of employers with 500 or more employees. Well over half (59%) of very large organizations (20,000 or more employees), which typically offer employees a choice of medical plans, now offer a CDHP.
Moving even a small number of employees out of a more expensive plan into a CDHP can result in significant savings for an employer. The cost of coverage in a CDHP with a health savings account is about 20% lower, on average, than the cost of PPO coverage – $7,833 per employee compared to $10,007.
“PPACA requires that health plans cover, at a minimum, 60% of eligible health plan expenses,” says Ms. Cunninghis (Sharon Cunninghis, US business leader for health and benefits). “Some employers are resetting their health plan value to move closer to that minimum, and saving money as a result.”
Offering a lower-cost CDHP is one way employers “reset” plan value in 2012. Others simply raised the deductible of an existing PPO plan. The average PPO in-network deductible reached $1,427 for an individual in 2012.
“Over the past decade, employers have figured out how to stabilize health benefit cost increases through cost-shifting and other cost management techniques. Now we’re seeing a move toward even greater control through defined contribution strategies,” says Ms. Cunninghis.
An example of a defined contribution strategy is determining in advance what the employer contribution to the cost of coverage will be, and requiring employees to pay anything above that amount. If the employer offers a range of plans, employees can save money by choosing a lower-cost plan. Nearly half of employers – 45% – say they currently use or are considering using a defined contribution strategy.
By Don McCanne, MD
Pop the champagne corks! Businesses have held the rate of health benefit cost increases to only 4.1%! Though that is still twice the rate of inflation, it’s the smallest increase in 15 years!
How did they achieve this success? By moving employees into lower cost consumer-directed health plans. By increasing deductibles for the plans. By other forms of cost shifting. By lowering actuarial values of plans to 60% – the minimum required by the Affordable Care Act. By adopting defined contribution strategies. By shifting to private insurance exchanges. By herding employees into narrower provider networks.
So have the employers finally learned how to slow the escalation of health care costs? No! They have dumped their costs onto the backs of their employees!
So while they enjoy the bubbly in their executive suites, they have left too many of their employees without even any beer money.
If you didn’t read yesterday’s message that included the work of Thomas Piketty and Emmanuel Saez, you should. You will see that the solution is quite simple. Tax the crap out of the plutocrats and spend the proceeds on a public insurance program for all of us – an Improved Medicare for All. (I would use less inflammatory language except that wealthy employers who have such a low regard for their own employees do not deserve elegant language.)
Please note that this message does not apply to the multitude of small businesses which are struggling to maintain a modicum of success. These businesses are also victims of the burdensome health insurance costs. They too would benefit from an equitable public insurance program, if only they would make an effort to understand what it would mean for them. It’s our job to try to educate them.