Health Cost Containment Measures Taking Hold

November 18, 2009 ( – A new Mercer report on annual health care cost hikes says the 2009 annual increase of 5.5% to $8,945 was the lowest in 10 years.

A Mercer news release said employers predict that 2010 medical plan costs will rise by about 9% in 2010 if they make no design changes, and by about 6% if they make plan changes or swap out plan vendors.

The study shows a broad-based employer embrace of wellness plans carried out in a variety of forms – from health risk assessments to disease management programs to behavior modification programs. Those efforts are apparently having an impact.  Medical plan cost increases in 2009 were about two percentage points lower, on average, among employers with extensive health management programs than among those employers offering limited or no health management efforts.

Nearly three-fourths of employers that have measured the return on their investment in health management programs say they are satisfied with the year-over-year savings, lower utilization rates, or improved health risks.  However, only about a third of all large employers have formally measured ROI.

“Small and large employers used different strategies to keep cost growth down in 2009,” said Beth Umland, Mercer’s director of health and benefits research, in the news release. “Small employers moved employees into low-cost consumer-directed health plans and raised PPO deductibles. We saw relatively little cost-shifting among large employers – what jumped out was a real increase in their use of programs and policies designed to improve workforce health.”

According to Mercer, very large employers are increasingly willing to reward employees who demonstrate responsibility for their own health. Nearly a fourth of those with 20,000 or more employees vary employees’ premium contribution amounts based on their smoker status – 23%, up from 17% last year.

Small employers held down cost increases by raising deductibles for in-network PPO services. Their actions drove the average PPO deductible among all employers up by about $100 for an individual and $300 for families, to $1,096 and $2,515, respectively.

Consistent with past years, employers kept premium contributions relatively stable, choosing to keep the cost of coverage affordable while shifting the burden to those who use health services.

Compared to large employers, small employers have been slow to adopt high-deductible, account-based consumer-directed health plans (CDHPs), but in 2009, CDHP offerings among employers with 10-499 employees jumped from 9% to 15%.

While growth in CDHP offerings in 2009 was evident only among small employers, the plans are still more common among larger employers, the news release said. CDHPs are offered by 20% of employers with 500 or more employees, and 43% of those with 20,000 or more employees. 

More than two-fifths (44%) of employers said they would be more likely to offer a health care plan to their employees if all individuals were required to obtain coverage – a provision that is in U.S. House and Senate health reform proposals – and 57 % would be more likely to offer a health plan if they received an annual tax credit that would reduce the net cost of the health coverage to about $2,000 per employee.

On the other hand, less than a fourth (22%) say they would support a requirement to pay 4% of their payroll into a public or private fund to provide coverage to their employees if that were mandated by Congress.

Other findings of the poll include:

  • The prevalence of employer-sponsored health plans remains unchanged in 2009, at 65% of all employers. Among large employers (500 or more employees), health benefits are nearly universal.
  • Health care flexible spending accounts are offered by 27% of all employers, but by 85% of those with 500 or more employees. The average employee contribution is $1,424, well below the $2,500 cap that has been suggested in health reform proposals.
  • COBRA take-up rates rose after September 2008 for half (51%) of all large employers.
  • About half of large employers (49%) were already in compliance with the requirements of the Mental Health Parity Act; 47% have made (or will make) changes to their behavioral health coverage to comply, in most cases by removing special coverage limits.
  • Surcharges or other special provisions to limit election of coverage for spouses who have other coverage available are used by 12% of large employers, up from 8% in 2008.  An additional 5% are considering adding such a provision.
  • There was no further erosion in the prevalence of retiree medical coverage in 2009. Among large employers, 28% offer an ongoing plan for pre-Medicare-eligible retirees, and 21% offer one for Medicare-eligible retirees. Ten years ago, in 1999, these figures were 35% and 28%, respectively.

Mercer’s survey included public and private organizations with 10 or more employees and 2,914 employers responded in 2009. 

The full report will be published in late March 2010. The report costs $600 and the report and tables cost $1,200. For more information, visit  or call Tara Lewis at 212/345-2451.