Enrollment Growth Is ‘The Wild Card’ For Employer Health Care Costs

Large employers are looking to control health care cost growth in a number of ways, including consumer-directed health plans, instituting telehealth, joining private exchanges and broadening the definition of wellness programs. Those are among the results of a survey by the benefits consulting firm Mercer.

Employers predict that in 2015, health benefit cost per employee will rise by 4.6 percent on average, according to Mercer’s 2014 National Survey of Employer-Sponsored Health Plans, which contains data from 2,569 employers that sponsor health plans.

Average total health benefit cost per employee rose 3.9 percent last year to $11,204, an increase from 2.1 percent in 2013.

Julio A. Portalatin, president and CEO of Mercer, said in a news release that while employers have done “a remarkable job” of holding down health care cost growth, enrollment will rise this year as major provisions of the Affordable Care Act (ACA) take effect.

Many employers said they anticipate spending more money to cover more employees this year as the ACA requires companies to cover employers working 30 or more hours per week. This rule affects 38 percent of large employers, the survey found.

Tracy Watts, Mercer’s national leader for health reform, said enrollment growth is “truly the wild card” for employer health care costs this year.

“If employers wind up covering many more people, their spending will go up faster than the underlying growth in cost per employee might imply,” she said. “That will increase the pressure to find new ways to manage cost.”

Consumer-directed health plans (CDHPs) were one of the most popular ways for companies to control costs. CDHP enrollment jumped from 39 percent to 48 percent among large employers of more than 500 employees, and from 63 percent to 73 percent among jumbo employers with 20,000 or more employees.

Mercer experts said the ACA’s excise tax on health coverage costing more than $10,200 per individual and $27,500 for a family is putting pressure on employers to find ways to offer more affordable health coverage.

The tax takes effect in 2018. About one-third of employers are at risk of hitting the excise or “Cadillac tax” threshold if they don’t change what they offer through their employer-sponsored plans.

Mercer’s survey, released late last year, also found a surge in the number of large employers offering telehealth services which allow employees access to primary care services over the phone as a way to keep out-of-pocket spending low.

The survey found that 18 percent of large employers with more than 500 employees offered telehealth services, a 7 percentage point increase from the previous year.

Among jumbo employers, 34 percent offered such services, nearly double from the 18 percent offering telehealth the previous year.

Watts called the changes, which include adding a menu of voluntary benefits, “a major shift from the old ‘first-dollar coverage’ mentality.”

“These tools put the consumers in the driver’s seat, giving them the ability to make smart financial decision about their health care spending,” Watts said.

The survey is representative of about 600,000 employers covering nearly 100 million full-time and part-time employees.

Private health care exchanges were found to have gained “a foothold” last year. However, only 3 percent of large employers use such exchanges for active employees, 8 percent use them for pre-Medicare-eligible retirees and 15 percent use them for Medicare-eligible retirees.

The survey also found that 28 percent of large employers were considering using a private exchange within five years.

If employees don’t see anything to celebrate in a 4.6 percent increase in health benefit costs this year, at least they can rest assured that employers aren’t likely to drop the benefits and force employees to shop on public exchanges.

Mercer said only 4 percent of large employers say they will likely terminate their employer-sponsored health plan within the next five years. This is down 2 percentage points from last year’s survey.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].