Survey Says Group Health Care Plan Costs Climbed 6.9 Percent This Year

Group health care plan costs jumped an average of 6.9 percent in 2010, the biggest increase since 2004, according to a survey of more than 2,800 employers released Nov. 17 by Mercer, which is based in New York.

That 6.9 percent increase brought costs up to an average of $9,562 per employee compared with an average of $8,945 per employee in 2009, according to the survey.

By contrast, costs rose by an average of 5.5 percent in 2009, the lowest increase in more than a decade, while costs climbed an average of 6.3 percent in 2008. Between 2005 through 2007, costs climbed by an average of 6.1 percent in each of those three years.
Mercer consultants said the spike in costs may be the result of two factors: medical providers boosting their fees and charges and an increase in utilization.

“Higher prices for health care services seem to be part of the equation, but if the recession caused a slowdown in utilization last year, we may also be seeing the effect of employees getting care they’ve been putting off,” Susan Connolly, a partner in Mercer’s Boston office, said in a written statement accompanying the survey.

To prevent even bigger cost increases in 2011—caused in part by meeting requirements, such as extending coverage to employees’ adult children up to age 26, set by the health care reform law and which kick in next year—many employers intend to make plan design changes, such as shifting more costs to employees or changing insurers.

Without health plan changes, employers predicted cost increases of about 10 percent next year. With design and other changes, employers expect to hold down their actual cost increase to an average of 6.4 percent in 2011, according to the survey.

Employers already are taking action to try to hold down plan cost increases. For example, among preferred provider organization plans imposing a deductible, the average deductible for individual coverage through in-network providers jumped by more than $100 in 2010, rising to an average of $1,200.

Similarly, the percentage of PPO sponsors that do not require a deductible for individual coverage from in-network providers fell to 16 percent in 2010, down from 22 percent in 2009.

In addition, more employers stopped offering health maintenance organizations—the most expensive plan design, with costs in 2010 averaging $8,892 per employee—while more employers added consumer-driven health care plans, such as plans linked to health savings accounts, with costs averaging $6,759 per employee.

In 2010, 26 percent of employers offered an HMO, down from 28 percent in 2008. As recently as 2005, just over one-third of employers offered an HMO.

On the other hand, this year, 17 percent of employers offered a CDHP linked to an HSA or health reimbursement arrangement, up from 15 percent in 2009. In 2005, just 2 percent of employers offered a CDHP.

The nation’s biggest employers have especially embraced CDHPs. This year, 51 percent of employers with at least 20,000 employees offered a CDHP linked to an HSA or HRA, up from 43 percent in 2009.

Among those jumbo employers, 15 percent of employees enrolled in CDHPs this year, up from 9 percent in 2009.

Copies of the National Survey of Employer-Sponsored Health Plans will be published in March.  

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

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