Study: Workplace Health Coverage Cost-Shifting Efforts Pick Up Steam

September 13, 2005 (PLANSPONSOR.com) - Employers may be predicting a health care coverage cost increase that is more manageable than in recent years, but the slowing of cost increases is primarily because of their vigorous employer cost shifting, according to a new study.

The survey of 1,883 employers by Mercer Human Resource Consulting and Marsh Benefits found that the cost of the average workplace plan would go up nearly 10% for 2006, but employers only predicted an average hike of 6.4% after making plan design changes, a news release said.

In 2006 small employers will again fare better than large, although the difference will not be as marked as it was. Large employers predict an average final increase of 6.8% for 2006, compared to 5.8% among small employers. Last year’s survey found that cost rose 7.5% for all employers. However, large employers (500 or more employees) experienced a much sharper increase (9%) than smaller employers (5.5%) (See 2004 Health-Care Cost Hikes Slow to 7.5% ).

“We used to think of cost-shifting as something you could do only every so often. But we’re seeing a new willingness on the part of employers – born of desperation – to shift cost in successive years to achieve acceptable cost increases,” said Blaine Bos, Mercer’s Minneapolis office leader for health and group benefits, in the news release. “At the same time, we’re helping many employers with longer-term initiatives such as health management and consumerism, with encouraging results.”

When asked about the types of changes they would make to reduce their cost increase for 2006, nearly two-thirds of the large employers surveyed (62%) said they would shift cost to employees. Tactics include increasing the percentage of premium paid by the employee (39% of large employers), or raising deductibles, copayments, coinsurance, or out-of-pocket maximums (32%). An additional 17% said they will increase cost-sharing some other way.

With cost rising more slowly for small employers, a smaller percentage of them (35%) said they would shift cost to employees in 2006.


These are preliminary findings from Mercer’s National Survey of Employer-Sponsored Health Plans 2005.

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