Mercer
November 19, 2007
Total U.S. health benefit cost rose by 6.1 percent in 2007, the same pace as last year, to an average of $7,983 per employee, according to the National Survey of Employer-Sponsored Health Plans, conducted annually by Mercer and released today.
The bad news is that’s still more than twice the rate of inflation. Health cost growth is outpacing wages and material costs and eroding business profitability.
Among employers with fewer than 200 employees, health coverage prevalence fell from 63 percent to 61 percent in 2007 — and that’s down from 66 percent five years ago. This drop-off is continuing despite the new availability of relatively low-cost consumer-directed health plans (CDHPs).
The Mercer survey also found that employers expect cost to rise 5.7 percent in 2008. That figure takes into account any changes that employers will make in the level of benefits, the type of plan offered, or the plan vendor. If employers made no changes, the cost of their largest medical plan would rise by about 8 percent, they predict.
After the out-of-control cost growth in the early part of this decade, a fourth year of single-digit increases begs the question, why isn’t it worse? Cost shifting is one reason. Among large employers (those with 500 or more employees), average in-network PPO deductibles rose by about 11 percent.
Another factor that may have served to slow cost increases was the growth in enrollment in consumer-directed health plans, the type of medical plan with the lowest cost by far. In 2007, the percentage of employees enrolled in a CDHP (based on either a Heath Savings Account or a Health Reimbursement Account) rose from 3 percent to 5 percent of all covered employees. The lion’s share of the plans added in 2007 were based on HSAs, which don’t require an employer contribution.
So-called “mini-med” plans, which strictly limit the total amount of benefits payable in a year ($10,000 is a common limit) are now offered by 7 percent of all large employers and 19 percent of large wholesale/retail employers as a way to provide some kind of low-cost coverage to part-timers not eligible for the regular plan or to full-time employees not yet eligible for coverage.
http://www.mercer.com/referencecontent.jhtml?idContent=1287790
Comment:
By Don McCanne, MD
The continued escalation of employers’ health benefit costs at twice the rate of inflation is bad news, but what is much worse is that employers have responded by shifting even more of the costs to their employees. These increases compound each year.
Perhaps the most alarming development in this trend is the increased use of mini-med plans. These plans typically cut off coverage once health care spending has reached $10,000. Obviously these plans fail to provide financial security for individuals with major acute or chronic disorders. Since they won’t work for people who really need health care, they should not be dignified with the label of “low-cost coverage.”
Both employers and insurers continue to seek innovations to reduce their spending on health care. Placing coverage decisions in the hands of either the insurers or the employers will continue to result in greater out-of-pocket costs for individuals, especially those with significant health care needs.
In contrast, the administrators of a national health program would continue to seek ways to pay for the health care that individuals need. (You can write your own “Why do we… ” question here, and then attempt to answer it.)