Employers expected to act on increase in health care costs: survey

Despite a reported 4.4% increase in employer health care costs in 2014, the majority of large U.S. employers say they are more inclined to maintain benefits to active employees, but will modify plans and continue to shift over costs to their employees.

A new Towers Watson/National Business Group on Health survey – which included more than 595 large employers in the nation – finds that employer costs are expected to rise by 4.4 percentage points this year, to $9,560 per employee. Last year, health care costs had dropped to a 15-year low, according to the Employer Survey on Purchasing Value in Health Care.

With these increases, approximately 95% of employers surveyed note that subsidizing health care coverage to active employees is important for their rewards package. At the same time, 92% expect to institute “moderate to significant changes” to their health programs offering in just four years.

Over the next few years, employers hope to continue their strategic move to force employees to shoulder more costs. For instance, in 2014, the total employee cost share remained constant at 37% year-over-year. However, share of premiums paid grew by 7% to $2,975, coupled with out-of-pocket responsibility for this cohort, the 19^th annual survey found. 

Alternative options for employers voiced in this year’s study – which tracked responses between November 2013 and January – include increasing share of account-based health plans and contribution strategies or even placing some active employees on private health insurance exchanges.

Roughly half of employers surveyed  – while noting a decline in favoritism toward subsidized health care for spouses for 2015 and beyond  – say they have bumped up contributions for spouses and dependents to pay at higher rates. If they haven’t incorporated these options already, 19% expect to do so next year, the survey says.

In terms of ABHPs, nearly three-quarters of employers surveyed currently offer these options. Startlingly enough, total-replaced consumer-directed health insurance plans have seen a rise to 16%. In 2013, the survey found that 66% of respondents provide ABHP as an option and 15% currently offer it as the only health care option to employees.

Similarly, Prudential Insurance Company of America’s eighth annual Study of Employee Benefits said recently that nearly half of surveyed employers report that they are extremely or very likely make high-deductible health plans or consumer-directed health care plans their sole care option.

According to Helen Darling, the president and CEO of the NBGH, many employers are keeping a watchful eye on private exchanges as an option. Even with this industry hesitation, Towers Watson moved in November 2013 to purchases private health care exchange provider Liazon for $215 million.

“While private exchanges are proving to be an effective option for retiree health coverage, most employers are taking a wait-and-see approach to gauge whether these models can deliver greater value for their active employees than self-managed programs,” Darling says.

Additional avenues for employers to consider are health and financial subsidies, promoting value in health care options and addressing retiree medical coverage, where two-thirds of employers report in the joint survey they will push the individuals to public exchanges. Retiree health costs were also contested in a recent Aon Hewitt survey.