The annual cost increases for employer-sponsored health plans remained low in 2017, even without employers moving significant numbers of employees onto high-deductible plans, the results of an annual survey of employer-sponsored health plans conducted by human resources consultancy Mercer indicated.
The survey of a nationally representative sample of 2,481 employers was conducted during the summer of 2017. The results showed that the average total health benefit cost per employee rose 2.6% in 2017, up just slightly from an increase of 2.4% reported in 2016. Citing previous survey data, researchers observed that cost growth has averaged just 3.3% annually over the past five years, compared to 6.2% over the prior five-year period.
But while acknowledging that these growth rates have been modest, researchers warned that health coverage continues to represent an enormous expense for both employers and employees. The survey results showed that for employers, the average total cost of health benefits amounted to $12,229 per employee, or 14% of total payroll, in 2017; and that even among smaller employers (those with 10-499 employees), which typically offer less generous benefits, the average total cost of health benefits came to $11,527 per employee in 2017. The findings further indicated that in 2017, employees were paying, on average, 24% of the total cost of coverage through paycheck deductions.
Researchers also observed that while employee contributions as a percent of premium have been stable for decades, over the past 10 years, employers have assigned employees more responsibility for cost at the point of service, both by increasing deductibles and by adding high-deductible consumer-directed health plans (CDHPs) with health savings accounts (HSAs). The survey found that in 2017, deductibles in traditional preferred provider organization (PPO) plans continued to increase, to nearly $1,000 on average for employers with 500 or more employees and nearly $2,000 for those with 10-499 employees.
However, after years of steady growth, enrollment in CDHPs was found to have risen by only a single percentage point in 2017, from 29% to 30% of all covered employees. The survey indicated that in 2017, just 10% of employers with 500 or more employees offered a CDHP as the only plan at their largest worksite, and that most mid-sized and large employers offered a CDHP alongside higher-cost plans with more generous benefits.
The survey results also showed that employers are increasingly offering tools to help employees make more informed health care decisions: 82% of the employers surveyed with 500 or more employees said they provide a “transparency tool,” or an online resource to help members compare the prices and the quality ratings of different health care providers.
In addition, the survey found that growing numbers of employers are helping plan participants defray the cost of care by promoting access to less expensive services, such as telemedicine. In 2017, 71% of the employers surveyed with 500 or more employees said they offered telemedicine services as a covered benefit, up sharply from 59% in 2016. While the survey showed that employers with telemedicine programs in use in 2016 reported an average utilization rate of 7%, researchers stressed that this rate is expected to rise as the programs become more established.
Looking at the role played by prescription drug costs in driving up overall health benefit costs, the survey found that drug benefit costs have been rising around 8% annually among employers with 500 or more employees, due in large part to an average 15% increase in spending on high-priced specialty drugs. The findings indicated that 53% of large employers are attempting to help keep these costs in check by steering employees to specialty pharmacies, which provide cost management strategies that can also prove less costly and more convenient for patients.
From Benefit Trends Newsletter, Volume 60, Issue 12
The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2017 Liberty Publishing, Inc. All rights reserved.