Mercer’s View of Health Benefit Trends

It is the time of year when the large benefit consulting firms begin to give us perspective on employer-based health plan trends.  Mercer issued a press release giving some summary information from its 2014 survey of 2569 companies with at least ten employees.   (Mercer Release)   For 2014, Mercer’s survey finds that average per-employee health benefit costs rose 3.9% to $11,204.  For 2015, employers expect an increase of 4.6%.  That increase would be 7.1%, but companies expect to make design changes that limit the growth of spending.  One factor leading to reduced spending increases in 2014 is the continued enrollment in high-deductible plans, which now account for 23% of all covered-employees, up from 18% a year ago.  48% of employers with over 500 workers and 72% of very large companies, those with more than 20,000 employees, offer at least one high-deductible plan.  Enrollment in traditional PPOs and HMOs fell.  The average cost of the high-deductible plans is 18% less than that for PPO coverage and 20% less than traditional HMO costs.  Fear of the cadillac tax may be helping drive adoption of high-deductible plans.  While only 7% of large employers and 11% of the largest ones have a high-deductible plan only strategy now, more say they are likely to adopt this approach in the future.   Given the growth of these plans, employers are also offering more comparison and transparency tools.  77% of firms say they offer cost and quality comparison tools to employees.

For large firms, those with more than 500 employees, there has been some movement to private exchanges–3% used one in 2014 and 28% say they will move to one in the next five years.  Employers may find that more people are enrolling in health benefits in 2015, as the reform law requires that all employees working more than 30 hours a week be offered coverage.  About 10% of large employers say they have reduced work hours in an effort to keep part-timers from being eligible.  Many employers surcharge for spouses who have access to coverage elsewhere, or make them ineligible, with the largest firms, those with more than 20,000 workers, being the most likely to do so.  Another cost control feature, the use of telehealth services, are covered by 18% of large employers and 34% of the largest ones.  Notwithstanding the continued growth in costs and regulatory complexity, only 4% of all large employers say they might drop health benefits in the next five years, although 16% of firms size 50-199 workers indicate that as a possibility.