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Employers project 4.8% rise in 2014 benefit spending

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Are employers finally getting a grip on that line item marked “health care?”

A Mercer study released Tuesday shows that companies expect to bump up their budgets for health benefits for 2014 by 4.8 percent.

The data was extracted early by Mercer from some 2,000 responses to a major employer survey that will be released in its entirety later. Last year, Mercer said, health benefit cost per employee increased by 4.1 percent over 2011 — a 15-year low.  

“The recession has been one factor behind slower cost growth, by dampening utilization,” said Beth Umland, Mercer’s director of research for health and benefits. “But employers have made fundamental changes in their health benefit programs in recent years that have put the brakes on unsustainable cost growth.”

The fact that employers are actively reexamining their plans to hold down costs comes through when they are asked how much costs would increase “if they made no changes to their current plans.” The answer: about 7 percent.

Among strategies employers reported they are using to control healthcare costs: consumer-directed health plans, which give employees financial incentives to be more careful about how they spend health dollars.

Employers also are turning to wellness programs to manage costs, Mercer affirmed. Wellness plans continue to grow in popularity as employers embrace the concept that healthier employees don’t use their health insurance as often.

There is a potential bump in the road. With the advent of the Patient Protection and Affordable Care Act, employers will have to offer coverage to more workers. Mercer found that “about a third of all large employer health plan sponsors (those with 500 or more employees) do not currently offer coverage to all employees working 30 or more hours per week.”

Mercer opined that some employers will follow in the footsteps of giants like Trader Joe’s and cut worker hours just below the 30-hour trigger point.

But, Mercer concluded, “most employers affected by the rule will simply open their plans to all employees working 30 or more hours per week and brace for rising enrollment. In addition, next year all individuals will be required to have health coverage or face a tax penalty. Because of this, employers may see fewer employees choosing to waive coverage.”

Given these factors, Mercer suspects that overall cost-per-employee for health care may jump as employers integrate the requirements of the PPACA into their budgets.

“Rising enrollment will be an even bigger issue in 2015 when the shared responsibility penalty goes into effect,” said Tracy Watts, senior partner and Mercer’s leader for health reform. “While some employers are going ahead with plans to expand eligibility in 2014 despite the delay, most of those with the big part-time populations are holding off and will feel the pinch in 2015.”

Meantime, Mercer also projects that, based on its early data analysis, very few large employers (5 percent) will terminate their health plans over the next five years. More small employers (those with fewer than 200 employers) will do so, Mercer said.


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