Large Employers Foresee Increased Health Care Costs

August 28, 2013 ( – The cost of providing employee health care benefits at the nation’s largest employers is projected to increase by 7% in 2014, says a new survey.

This is the third consecutive year that employers have budgeted for this amount, according to the survey from the National Business Group on Health (NBGH), a nonprofit association of large U.S. employers. The survey, which examined factors such as costs and plan design changes for 2014, also found that despite being able to keep cost increases stable for another year, employers continue to embrace changes designed to engage workers in health management and healthy lifestyles.

“Rising health care costs remain a serious concern for U.S. employers,” said Helen Daring, president and CEO of NBGH. “Employers spent considerable time and energy this year designing health plans that comply with the various provisions of the Patient Protection and Affordable Care Act [PPACA] that would have become effective next year. And, while the decision to delay provisions related to the employer mandate has provided respite from some of these requirements, the pressure remains on employers to lower costs. Interestingly, many respondents indicated that a portion of their budgeted costs for 2014 was to implement changes mandated by the PPACA. With the delay, it is unclear how employer costs will be affected.”

While large employers will be ineligible to participate in state health exchanges until 2017 at the earliest, the survey found that employers expect that certain populations may find exchanges to be a viable option on an individual basis in 2014. For example, about four in 10 (41%) employers said COBRA plan participants might find public health exchanges to be the most cost-effective option. More than one-fourth (26%) of employers felt that some pre-65 retirees might opt to join exchanges, while 20% said that some part-time employees will do the same.

“Private exchanges are another option some employers are considering. In the last year, there has been an increase in the number of private exchanges that are being launched. And, while some employers are considering private exchanges for active employees sometime in the future, very few (3%) are considering eliminating health care coverage entirely,” said Darling.

The survey also found that implementing a consumer-directed health plan (CDHP) was considered the most effective tactic to control rising costs, cited by more than one-third of employers (36%). Nearly three-quarters of employers (72%) were found to offer at least one CDHP. While this number has remained relatively steady over the last few years, the survey found that the number of employers offering only a CDHP plan to employees continues to rise. Twenty-two percent of employers said they plan to implement a total replacement CDHP plan next year, up from 19% this year.

The survey asked employers about a variety of initiatives they use to manage the health of their employees. More than four in 10 employers (44%) currently have an on-site clinic in at least one of their locations, with 9% expecting to build a clinic next year. Employers also cover a variety of services/ medications for the treatment of obesity and severe obesity. Two-thirds of respondents (66%) will cover surgical interventions for the treatment of severe obesity in 2014. Additional treatments covered by some employers include Food and Drug Administration (FDA)-approved medications (36%) and intensive, multicomponent behavioral interventions for plan participants with a body mass index (BMI) of more than 30.

Employers were also asked about wellness programs. Nearly all employers were found to offer a tobacco cessation program (89%), and 77% offer telephonic or on-site health coaching. More than half of employers (55%) also make on-site weight management programs available to employees. The vast majority also conduct health assessments (88%) or biometric screenings (83%).

“Employers continue to implement numerous tactics to control costs, improve employee health and productivity and ensure the delivery of high-quality health care to their employees and dependents. Some employers are taking creative approaches in their efforts to win the war on rising health costs. These include managing specialty and non-specialty pharmaceuticals, contracting directly with providers who have been shown to provide high-quality health care as well as offer employees numerous programs designed to help them live a healthy life,” concluded Darling.

The survey, based on responses from 108 of the nation’s largest corporations, was conducted in June, prior to the Obama administration’s decision to delay for one year the implementation of the PPACA employer mandate.