Medical Costs Continue to Rise

June 27, 2014 ( – Employer plan changes brought medical costs down, but medical costs continue to increase faster than inflation, says a new survey by PwC.

The 2014 Health and Well-Being Touchstone Survey finds that the average reported increase in medical plan costs before plan changes was 7.8% for 2013, which was slightly more than the 7.5% predicted in the 2013 survey.

The average reported annual increase after plan changes was 4.5% for 2013, says the survey, which is lower than the 5.4% predicted in the 2013 survey, and 5.3% expected for 2014. The average 2014 gross spend per active employee is $12,442. The service industry was the most costly, with an average of $13,460. The average 2014 net spend per active employee is $8,496. And the manufacturing and Retail/Consumer industries contributed the least amount towards employee medical coverage.

The survey also reveals that the most common trend rates used in the 2014 renewal for medical, prescription drug, and dental plans were 9.6%, 8.6%, and 5.5%, respectively.

Retiree Medical Programs

When it comes to retiree medical programs, the survey finds that 38% of employers provide pre-65 retiree medical programs, while 31% provide post-65, relatively consistent with 2013 (36% and 31% respectively).

Of those who provide retiree medical plans, new hires are often excluded. Forty-two percent of employers do not offer pre-65 coverage and 48% do not offer post-65 coverage to new hires, up from 2013 (40% and 45% respectively). In addition, 43% of employers are considering moving their pre-65 retirees to a private exchange with a company subsidy.

Wellness Programs

More employers are offering wellness programs, the survey found, with 71% doing so in 2014, up from 68% a year earlier. The Employee Assistance Program (EAP) is the most common wellness program (85%), followed by biometric screening (78%), health risk questionnaire (76%), tobacco cessation (63%), and physical activity program/fitness discount (58%).

Health risk questionnaires had the largest participation rate of 57% followed by body mass index and biometric screening with 54%. Biometric screening was indicated as the most valuable wellness program by 52% of employers.

A majority of employers (93%) currently target physical dimensions with their wellness programs, and almost three-quarters of employers (73%) target mental dimensions. About 25% to 30% of employers are interested in addressing additional aspects of well-being, including financial, career, social and emotional.

The survey was completed in the first quarter, and the data contains detailed benefits information provided by approximately 1,200 participating employers in 35 different industries across the nation.

More information about the survey, including how to request a copy of the results, can be found here.