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Employer-based Health Plans Cost to Rise Modestly

October 1, 2013

By Diane Stafford, The Kansas City Star

Doctor holding a clipboard  

Consumers may not feel like health care insurance costs are under control, but a leading indicator projects the third straight year of 5 percent-or-under cost increases for employers who offer employment-based plans.

A preliminary survey by the Mercer consultancy, released today, finds that employers' average health benefit costs per employee are expected to rise by 4.8 percent in 2014.

To be sure, part of the relatively slow cost increase for employers is because they have revamped their plans. If they made no changes, their costs would rise by 7 percent, Mercer said.

The survey also noted the unknowns associated with implementation of the Affordable Care Act. About half of the employers in the survey expect additional costs from rising enrollments and new fees imposed by Obamacare.
Mercer cautioned that the projections are preliminary and actual cost growth may differ. Meanwhile, it seemed apparent that 2014 health insurance costs to employers would rise more than the relatively 4.1 percent cost increase for 2012.

The expected increase for employers in 2013, still to be finalized, was 5 percent.

Many employers are managing their cost increases by implementing consumer-directed health plans, which give employees financial incentives to spend less on health care by taking a wellness, or preventive approach. These plans usually are paired with an employee-controlled account.

Tracy Watts, a Mercer partner, said that slower growth in employers' costs "will be overshadowed by additional costs from higher enrollment and fees."

One factor that will increase some large employers' costs is the reform act requirement that they offer coverage to employees who work 30 or more hours a week.

The Mercer report said about a third of large employers -- with 500 or more employees --do not currently offer coverage to all employees working 30 or more hours per week. Thus, industries with a heavy share of part-time workers "will be the hardest hit by this rule," Mercer said.

About half of employers in retail and hospitality currently do not offer coverage to all employees working 30 or more hours per week, the report indicated.

"Some employers will minimize the number of newly eligible employees by cutting back on hours for at least a portion of their workforce -- 11 percent of all large employers say they will do so," Mercer said.

When asked to estimate the cost of higher enrollment and new fees, such as a required reinsurance fee of $63 per covered employee, about half of the employers surveyed say they will spend at least 2 percent more on health benefits in 2014 -- over and above the normal increase in cost.

Another third said they couldn't predict. Only one-fifth of the employers said they were confident that health reform would have little or no impact on their spending in 2014.

The Mercer survey found only 5 percent of large employers expecting to end their health care coverage plans for employees within the next five years. But about 20 percent of employers with fewer than 200 employees said
it was likely they would terminate their plans.

Original headline: Employers' cost increases for 2014 employee health insurance forecast at 4.8 percent


Source: (c)2013 The Kansas City Star (Kansas City, Mo.) Distributed by MCT Information Services

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