The health care benefit cost trend continues to move in the right direction for employers, but only because they continue to cut benefits and take other steps to manage cost. According to a survey of 1,883 employers released today by Mercer Human Resource Consulting and Marsh Benefits, if employers simply renewed their current medical plans, making no changes, their average cost increase would be nearly 10% � about three times the rate of general inflation. For many employers, an increase of that size just isn�t manageable.
When asked what their actual cost increase for 2006 will be � after making plan design changes � employers predicted an average increase of 6.4%. The tactic many will use to hold down their cost increase is cost-shifting.
�We used to think of cost-shifting as something you could do only every so often. But we�re seeing a new willingness on the part of employers � born of desperation � to shift cost in successive years to achieve acceptable cost increases,� says Blaine Bos, Mercer�s Minneapolis office leader for health and group benefits. �At the same time, we�re helping many employers with longer-term initiatives such as health management and consumerism, with encouraging results.�
Last year, according to Mercer�s National Survey of Employer-Sponsored Health Plans 2004 , cost rose 7.5% for all employers. However, large employers (500 or more employees) experienced a much sharper increase (9.0%) than smaller employers (5.5%). Small employers are much more likely to use insured, rather than self-funded, health plans, and an effect called the underwriting cycle brought lower prices in the insured health plan market. In 2006 small employers will again fare better than large, although the difference will not be as marked as in 2004. Large employers predict an average final increase of 6.8% for 2006, compared to 5.8% among small employers.
When asked about the types of changes they would make to reduce their cost increase for 2006, nearly two-thirds of the large employers surveyed (62%) said they would shift cost to employees. Cost-shifting tactics include increasing the percentage of premium paid by the employee (39% of large employers), or raising deductibles, copayments, coinsurance, or out-of-pocket maximums (32%). An additional 17% said they will increase cost-sharing some other way.
With cost rising more slowly for small employers, a smaller percentage of them (35%) said they would shift cost to employees in 2006. �Small employers also have less flexibility to tinker with plan design,� says Mr. Bos. �They�re most likely to shop around for a cheaper plan.�
These are preliminary findings from Mercer�s National Survey of Employer-Sponsored Health Plans 2005 . The survey is still in the field and the complete results, including the actual cost increase for 2005, will be released by the end of the year. The preliminary results discussed above are based on employers who responded by Sept. 7; these results are not weighted and represent only the respondents. Ultimately, close to 3,000 employers will participate in the survey and the final results will be weighted to be nationally projectable. For more information on Mercer�s survey, visit www.mercerhr.com/ushealthplansurvey