Keeping Benefits Costs in Check

With the 2012 election season behind us and President Barack Obama returning to the Oval Office, the fate of the Affordable Care Act seems secure.

For many employers, this means exploring ways to contain benefits costs they project to increase once ACA provisions take hold in 2014.  

Now would be a good time to start, and if a recent survey from New York-based consultancy Mercer is any indication, many companies are already well on their way.

Mercer’s National Survey of Employer-Sponsored Health Plans finds employers held 2012 health benefits cost growth to the lowest average annual increase since 1997. The poll of 2,809 employers found growth in the average total health benefits cost per employee slowing from 6.1 percent in 2011 to 4.1 percent this year.

The cost averaged $10,558 per employee in 2012. Large employers—those with 500 or more employees—experienced a higher increase (5.4 percent) and higher average cost ($11,003). According to the survey, employers expect another fairly low increase of 5 percent in 2013. This bump, however, reflects changes companies plan to make to reduce cost, according to Mercer. Cost would rise by an average of 7.4 percent for companies making no changes.

Employers are “very aware that, in 2014, when the health reform law’s provisions kick in, they will be asked to cover more employees and face added cost pressure,” said Julio A. Portalatin, Mercer president and CEO, in a statement. “They’ve taken bold steps to soften the impact, and it’s paying off already.”

One step some employers have already taken to “reset” plan value in 2012 included offering a lower-cost consumer-directed health plan, according to the study. Others have raised the deductible of an existing PPO plan, for example.

Companies are also looking at new ways to purchase health insurance as well as influence the quality of care employees receive, according to Mercer. Among participating companies with 5,000 or more employees, the use of high-performance provider networks rose from 14 percent to 23 percent in 2012, with the use of surgical centers of excellence increasing from 18 percent to 35 percent.

Still, while organizations “deserve a lot of credit” for containing cost growth this year, “no one silver bullet will end cost escalation forever,” and companies must make containing benefits costs a priority in the year ahead and beyond, noted Tracy Watts, a partner in Mercer’s Washington, D.C. office.

Health reform has presented us with a new set of challenges, and we have to keep thinking one step ahead.”