Recession Will Cause More Health Cost Shifting

By Staff Report

May. 1, 2009

The recession likely will boost group health care costs higher than employers anticipated, leading more organizations to shift more costs to employees and adopt lower-cost consumer-driven health plans, according to a survey released Thursday, April 30.

Employers surveyed by benefit consultant Mercer of New York now expect health care costs to rise by an average of 7.4 percent this year. That compares with a 6 percent average increase employers predicted in a 2008 Mercer survey.

One possible reason for the higher-than-expected increase is increased utilization of health care services, according to the survey. In fact, 15 percent of the 428 responding employers said medical plan utilization has been higher than expected.

Mercer consultants said it isn’t surprising that employees and their dependents would step up their use of health care services during a recession.

More employees, fearful of being laid off, want to get medical tests and have health care services completed while they still have employer-based coverage, said Beth Umland, Mercer’s director of research for health and benefits in New York.

With costs going up at a time when many employers can least afford it, many intend to shift more costs to employees next year.

For example, 47 percent of respondents said they are likely to increase the percentage of premium employees pay in 2010.

In addition, 22 percent of employers say they are likely to add consumer-driven health care plans—either a CDHP linked to a health savings account or a health reimbursement arrangement—in 2010.

“This will be a boon to CDHPs,” said Linda Havlin, Mercer’s global leader for research and knowledge management in Chicago.

Increased employer interest in CDHPs during a recession is not surprising, given that this type of plan costs much less than other health care plans, according to Mercer.

In 2008, Mercer found that HSA-based CDHPs cost an average of $6,027 per employee, compared with an average of $7,815 per employee for more traditional preferred provider organization plans.

The survey also found that more employers were in favor of broad health care reform legislation that would require employers to offer a health care plan or pay a fee to help fund coverage for the uninsured, and a requirement that all individuals be covered in a health care plan.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail

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