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.

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

As November’s presidential election looms near, Mercer also asked employers about what they would like to see changed in the ACA. Eighty-percent of large employers or those with 500 or more employees, favor eliminating the excise tax, and 61% favor eliminating the employer mandate or so-called “play or pay” rule, which requires employers with 50 or more employees to offer coverage or face penalties. 

As for a complete repeal of the ACA, 47% of employers favored that action. Among the largest employers or those with at least 20,000 employees, 40% favored repealing the ACA.

Employers were also asked whether they expressed interest in terminating their plans and sending their employees to the public exchanges. Only 2% of large employers and 9% of small employers or those with 10-499 employees said it is “at all likely.”

“The public exchange helps fill a critical gap in the U.S. health care system, but it hasn’t proven to be an attractive alternative to employer-sponsored coverage,” says Beth Umland, Mercer’s director of research for health and benefits. “Employers are in the health benefits game for the long haul and need to work together to make that a sustainable proposition.”

These results are preliminary findings from Mercer’s "National Survey of Employer-Sponsored Health Plans 2016." The full report will be released later this year.