Health Care Costs/Cost Shifting Are Up

March 8, 2012 ( - Average total healthcare costs per employee are expected to reach $11,664 in 2012, up from $10,982 in 2011.

The 17th Annual National Business Group on Health/Towers Watson Employer Survey on Purchasing Value in Health Care found trends remain double the rate of inflation. Employees’ share of premium costs increased 9.3% between 2011 and 2012, with the dollar burden rising from $2,529 to $2,764.  

Employees contribute nearly 40% more for healthcare than they did five years ago, compared with 34% for employers.   

Likewise, out-of-pocket expenses increased over the last year from 16% to 18%. That increase is partly due to subsidy shifts for dependents, as nearly half of companies increased employee contributions in tiers with dependent coverage. About a quarter of companies (24%) are using spousal surcharges, with another 13% planning to do so next year. 

The total employee cost share, including premiums and out-of-pocket costs, climbed from 33.2% in 2011 to 34.4% in 2012. 

The median trend for employers that have maintained cost increases at or below the TW/NBGH median for the past four years (consistent performers) was 2.2%, compared with 6.1% for all respondents. The findings of this year’s analysis show that the most successful companies stand above their competitors by making significant strides in six core areas: 

• Health improvement 

• Engagement 

• Accountability 

• Linking provider strategies 

• Technology 

• Healthy environment 

Only 3% of employers are somewhat or very likely to discontinue healthcare plans for active employees with no financial subsidy in 2014 or 2015. Forty-five percent are somewhat to very likely to offer an employer-sponsored health plan to only a portion of their population and direct ineligible employees to the state exchanges. Today, 23% of companies are very confident they will continue to offer healthcare benefits for the next 10 years, down from a peak of 73% in 2007.  

The survey found four out of 10 employers view subsidizing healthcare benefits for retirees of no importance to their employee value proposition. Eight percent of employers with retiree medical programs plan to make changes to their subsidy in 2013, and an additional 20% are considering making changes in 2014 or 2015. While only 10% of employers with retiree medical programs currently offer a retiree medical account, 4% are planning to offer them by 2013, and another 18% are considering them in 2014 or 2015.

Employers Asking More from Health Benefit Providers  

A top focus for nearly a quarter of employers is to review healthcare benefits as part of their total rewards strategy, according to the 17th Annual National Business Group on Health/Towers Watson Employer Survey on Purchasing Value in Health Care.  

Employers have been asking for more from their health plan vendors — particularly in two areas: helping engage employees in better managing their health, and providing greater transparency on prices and quality.   

Thirty-eight percent of employers say their vendors offer only to a slight extent — if at all — a center of excellence (COE) network of facilities that provide the best outcomes and reasonable prices for procedures. Just 12% of employers say their vendors engage members in health improvement programs to a great or very great extent.   

While 34% of all respondents will require vendors to provide complete extracts of claim data (including discounts and identification of providers) in 2012, another 12% plan to do so in 2013. This year, 44% of employers will require vendors to share data for employee outreach and integrated reporting; another 16% plan to add that requirement in 2013.

Move to Account-Based Health Plans  

Nearly six-in-10 (59%) respondents to the NBGH/Towers Watson survey have an account-based health plan (ABHP) in place, with another 11% expecting to add one by 2013. Total replacement ABHPs are also on the rise, representing nearly 12% of companies with an ABHP — up from to 7.6% in 2010.  

ABHP enrollment has nearly doubled in the last two years — surging from 15% in 2010 to 27% in 2012. About 10% of respondents say employees and dependents enrolled in an ABHP are better at reducing lifestyle risks than those enrolled in non-ABHPs.  

Nearly four out of 10 companies currently consider their health savings account (HSA) for actives part of their retiree medical strategy, and another 20% are planning or considering such a strategy over the next three years.  

More than two-thirds of respondents offer employee incentives to improve health. Companies have also been more willing to add penalties to their arsenal (used by 20% today), and some (10%) have adopted achievement standards.   

Nearly one-third of employers plan to adopt or expand the use of financial incentives to encourage healthy behaviors as a main focus of their organizational health strategy. Conversely, one-fifth believe lack of sufficient financial incentives to encourage participation in programs is a major obstacle to changing employee behavior related to health.  

Forty-three percent of employers provide incentives to encourage participation in biometric screenings, and 30% offer incentives to engage in healthy lifestyle activities in the workplace. Employers are embracing incentives to encourage use of high-performance networks. While only 9% currently use incentives for this purpose today, 23% are planning to use them in 2013. 

The survey was completed by 512 employers, between December 2011 and January 2012, and reflects respondents’ 2011 and 2012 health program decisions and strategies and, in some cases, their 2013 plans. Respondents collectively employ 9.2 million full-time employees, have 8.0 million employees enrolled in their health care programs and operate in all major industry sectors. In 2011, respondents spent, on average, $10,982 per employee on health care, which equates to a collective $87 billion in total health care expenditures. 

The full survey report can be downloaded from