Employers Shifting Away From Cutting Health Plan Costs

According to preliminary findings from a new survey by Mercer, with health benefit costs stabilizing and the excise tax delay, employers are considering less cost cutting.

By Javier Simon | September 13, 2016
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Early responses from a survey by global human resources consultant Mercer found that employers predict per-employee health benefit costs to rise by an average of 4.0% next year after they make planned changes such as raising deductibles or switching carriers. Underlying costs would grow by 5.5% if employers made no changes, employers project. According to Mercer, employers have held cost growth to about 4% or less each year since 2011.

Mercer notes, “The difference between the underlying cost growth and the actual cost growth can be an indication of how much or little employers are cutting health plan value by raising deductibles or other cost-sharing provisions. A difference of just 1.5 percentage points for 2017 suggests employers do not plan to do much cost-shifting. For the past eight years, the difference has been approximately 3 percentage points and has not been less than 2 points.”

“This is an impressive achievement during a time when the ACA demanded so much attention, but with health benefit cost increases still double or triple inflation, we can’t declare the problem solved,” says Tracy Watts, senior partner and Mercer’s leader for health reform. “For that, employers as a whole will need to aim higher with the next generation of cost-management strategies in order to target fundamental problems in the health care system.”

Mercer points to several reasons why employers may be considering less cost-cutting next year including the effective date of the ACA’s excise tax on high-cost plans being pushed from 2018 to 2020.

“The excise tax creates an imperative for many employers to cut cost, not just to slow cost growth,” says Watts.  “Employers have been raising deductibles and out-of-pocket maximums for the past few years and many are reluctant to go any further. The delay lets them take a breather and focus on longer-term strategies with the potential to improve the health care system, like taking advantage of provider payment reforms and quality initiatives."

NEXT: Reflections on the ACA