Healthcare Costs Expected to Increase by Lowest Rate in a Decade
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American companies will likely pay an average of 5.4 percent more for health benefits in 2012, marking the lowest increase in costs since 1997.
American companies will likely pay an average of 5.4 percent more for health benefits in 2012, according to national survey by benefits consulting firm Mercer. This would mark the lowest increase since 1997. However, employees can expect the cost of their health benefits to continue increasing at a faster pace than their earnings.
The annual survey included responses from almost 1,600 employers. The findings of the analysis reflect employer efforts to cut costs by such methods as offering employees lower-cost health plans having increased paycheck contributions and higher deductibles.
Without any cost-cutting measures, employer health benefit costs are expected to increase by 7.1 percent, on average, which is a decline of close to 2 percent when compared to average annual increases of around 9 percent annually over the last five years.
But Mercer partner Susan Connolly pointed out, “While 2012’s slower cost growth is welcome news, it’s still higher than the [consumer price index], which means employers won’t be letting up their efforts to control costs anytime soon.”
The lower increase in health cost is due, at least in part, to fewer doctor visits from workers amidst the struggling U.S. economy, as well as the positive impact of employee health improvement programs put into place by corporations.
Connolly noted, “Earlier risk identification and health education are keeping people with health risks and chronic conditions away from the emergency room.” She also added, “Consumers are more aware that overuse and misuse of healthcare services will directly impact their wallets as well as their employer’s budget.”
However, by raising deductibles, doctor visit co-payments, and increasing employee contributions to insurance premiums, workers may feel the financial squeeze, even though growth for rates of health benefit costs is slowing.
According to Mercer, the average in-network PPO deductible for an individual is now $1,000 for small employers and $500 among large employers.
An increasing popular alternative to HMO and PPO health plans among employers are consumer-directed health plans (CDHPs). These are high-deductible plans with a tax-advantaged spending account, such as a health saving account, attached to them.
These plans are far less expensive as other plans, costing around 15 percent less than an average HMO or PPO plan, according to Mercer. In a press release, Beth Umland, Mercer’s director of health and benefits research said, “Employers see them as a way to provide more value to employees while at the same time managing cost.”
Due to the perceived advantages, a sharp rise in the number of such plans being offered in the workplace is expected next year. While 51 percent of the companies surveyed that have 20,000 or more employees currently offer a CDHP plan, a total of 58 percent plan to offer one in 2012.
According to Mercer, the survey results are only an initial forecast for next year. The final results based on a total of 2,800 employers will be forthcoming by the end of the year.
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by Drucilla Dyess
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