2011 Employer Health Care Hikes Pegged at 8.2%

September 15, 2010 (PLANSPONSOR.com) – Employer health care costs for active employees next year are projected to rise 8.2% after plan changes, to an average annual cost of $10,730, according to a recent Towers Watson survey.

A Towers Watson news release about its poll of 466 large-and mid-size employers said 59% plan to implement significant or moderate health care plan design changes in 2011, and two-thirds (67%) plan to do so a year later. While 57% report that health reform compliance is their top priority, 43% plan to rethink the long-term benefit strategy for active employees as their primary focus in 2011.

According to the news release, survey respondents are looking to:

  • Accelerate account-based health plan (ABHP) adoption: By 2012, 64% of employers are projected to offer an ABHP, and 39% of employers are projected to have ABHP enrollment of more than 20%.
  • Raise employee contributions: Employees must continue to cope with the increasing affordability gap, as merit pay increases have gone up 16% while employee contributions have risen 49% over the last five years.
  • Shift from incentives for employee participation in wellness programs to incentives for improvements in health metrics: 62% of employers are projected to apply outcome-based incentives by 2012.

According to the survey, 86% of U.S. employers plan to increase efforts to encourage employees to engage in wellness/health promotion programs, with 65% already or planning to increase incentives for these programs and another 17% considering this action for 2012.

Among specific health promotion efforts, employers plan to increase efforts to encourage employees to engage in behavioral health programs (78%), biometric screenings (74%), health risk assessments (71%), and disease management programs (67%).

In other findings of the Towers Watson health care cost survey, employers said they expect to:

  • Continue offering employer-sponsored health care plans for active employees (94%)
  • Lose their plan’s grandfathered status by 2011 (55%) or by 2013 (85%)
  • Increase efforts to encourage employees outside the U.S. to engage in their wellness/health promotion programs (54%)
  • Eliminate or reduce sponsorship of retiree medical plans (51%)
  • Examine new engagement strategies, such as using social networks and other channels to communicate about employee health and well-being (40%)

“Employees today are adjusting to historically lower-than-average merit pay increases, while at the same time facing higher health care contributions, copays and deductibles. This combination could adversely affect many employees and intensify the growing affordability crisis,” said Ron Fontanetta, senior health care consultant with Towers Watson, in the news release. “With employers also facing the challenge of steadily rising costs plus the advent of health care reform, the need to rethink employer approaches to health care is greater than ever.”

Towers Watson’s August 2010 health care survey was conducted online in early August.