Mercer: Health Coverage Cost Hikes Expected to Slow

September 12, 2006 ( - While the rate of health care benefit cost growth is expected to continue slowing next year, it will still be more than twice the rate of inflation, according to new data.

According to a news release on preliminary survey data from Mercer Health & Benefits LLC, the same exact health package a company has now will cost employers about 9% more in 2007.

Significantly, six in 10 of the 1,686 employers answering Mercer’s survey so far say they are not willing to or cannot cope with that big an increase and are planning design changes or changes of plans entirely. The post-change projected average cost for those companies, according to Mercer is 5.6%.

“As in the past few years, employers are working to lower cost increases by raising deductibles and other employee cost-sharing provisions,” said Blaine Bos, Mercer’s Minneapolis office leader for health and group benefits, in the news release. “But this year we’re also seeing lot of change in health plan offerings – specifically, employers implementing HSA- and HRA-based consumer-directed health plans. The slowdown in health benefit cost increases may also be reflecting a shift in enrollment into these lower-cost plans.”

In 2005, according to Mercer’s National Survey of Employer-Sponsored Health Plans 2005, cost rose 6.1% for all employers. Companies with 500 or more workers saw cost hikes of 6.7% while smaller firms were hit with an average 4.9% increase.

In 2007, the gap is likely to close. Small employers predict their average cost increase will accelerate to 5.5%, while large employers forecast their average increase will slow to 5.6%.

Among employers with 20,000 or more employees, the average cost increase “before changes” is only about 8%. These employers expect to achieve a final, “after changes” increase of 5.7%, according to Mercer.

Complete results from Mercer’s National Survey of Employer-Sponsored Health Plans 2006, including the actual cost increase for 2006, will be released by the end of the year, Mercer said.