According to Mercer, based on a survey of about 2800 employers, across all size companies health care costs per employee increased 4.1%, down from 6.1% in 2011. Employers expect about a 5% increase in 2013. The per employee cost for 2012 was $10,558; but small employers (500 or less employees) had a smaller growth rate–2.2%, and a smaller per employee cost–$9,913, than large employers at 5.4% and $11,003. (Mercer Release) While employers are concerned about the impact of the reform law, just 7% of large employers and 22% of small ones think it is likely they will drop coverage altogether. If even this number did eliminate benefits, however, it would have a major impact. Consumer-directed health plans continue to show solid growth and employers anticipate more offerings of this product in future years, since they can cost about 20% less than typical PPO plans. Deductible amounts are rising as well, up to an average $1427 for an individual in 2012.
Defined contribution strategies are drawing increased interest and 45% of employers say they either have or are considering use of defined contribution, which typically pegs the employer payment to the lowest cost plan and limits contribution increases to the rate of inflation or less. Health and wellness programs have spread to almost all employers and most believe those programs have an ROI. More employers are using incentives in connection with the programs, 45% in 2012 versus 33% in 2011, and the incentives are getting larger. The most common incentive is a reduction in premium contribution. Many employers also are using narrow networks and centers of excellence to control spending, especially on large-dollar procedures. Tobacco use surcharges have become more popular as well. Employers are very focused on capping their exposure to health costs; if provider consolidation and other factors begin to drive spending growth higher again, it will be interesting to see how strongly the employer community reacts and whether even more consider the once unthinkable option of dropping health benefits.