Cost growth slowed to 2.1% in 2013, a 15-year low, but appears to be edging back up. The projected increase for 2015 reflects actions employers will take to manage costs. If they made no changes to their plans for 2015, they predict costs would rise by 5.9% on average. However, only 32% of respondents are simply renewing their existing plans without making changes.
Under health reform, a significant number of employer health plan sponsors (22%) are likely to see enrollment grow next year when they are required to open their plans to all employees working 30 or more hours per week (63% were in compliance before reform was enacted, and 15% made the necessary changes last year for 2014). Among large retail and hospitality businesses, which typically employ many part-time workers, 39% will need to extend coverage in 2015.
While there has been much speculation that employers would reduce staff or cut hours to limit the number of employees becoming eligible in 2015, few of the surveyed employers say they will take either of those routes. However, many say they will manage schedules more carefully to avoid workers’ occasionally working 30 or more hours in a week (53% of those that must extend coverage to more employees in 2015) or to make it clear to new hires that they will work fewer than 30 hours (31%).
It’s hard to predict how many newly eligible employees—generally lower-paid, variable-hour workers—will choose to enroll in health plans when given the chance, Mercer notes. The tax penalty for individuals who do not obtain coverage will rise in 2015, to a minimum penalty of $325 per individual. When this penalty first went into effect in 2014, the minimum penalty amount was only $95, and few employers experienced significant growth in enrollment.
One strategy employers are using to soften the increase in health spending in 2015 is adding a low-cost, high-deductible health plan for the newly eligible employees—or for all employees. Consumer-directed health plans (CDHPs) that are eligible for a health savings account cost, on average, 20% less than traditional health plans. Mercer says health reform is clearly accelerating that trend. While about half of large employers offer a CDHP today, nearly three-fourths (73%) say they will have a CDHP in place within three years. Twenty percent say it will be the only choice available to employees (today, only 6% of large employers have moved to “full-replacement” CDHPs.)
“The move toward high-deductible consumer-directed plans is spurring other changes as well, such as more voluntary options,” says Tracy Watts, senior partner and Mercer’s national health reform leader. “While some employees are comfortable with a lower level of coverage, offering supplemental insurance alongside a high-deductible plan gives employees access to more protection if they want it.”
These results are based on responses from more than 1,700 employers to Mercer’s National Survey of Employer-Sponsored Health Plans through September 1. Complete results, including the actual cost increase for 2014, will be released by the end of the year.