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Employer cost hike for health care forecast at 4.8% per worker

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acrossThe Mercer consultant company released a new survey Tuesday that found employers’ average health benefit costs per employee are expected to increase by 4.8 percent in 2014.

The projected increase for 2014, while still relatively low, represents a slight uptick in the rate of growth, according to the report.

The relatively slow cost increase for employers is because they have revamped their plans. If they made no changes, their costs would rise by 7 percent, according to Mercer.

About half of employers surveyed expect additional costs from rising enrollments and new fees imposed by Obamacare.

“Employers have made fundamental changes in their health benefit programs in recent years that have put the brakes on unsustainable cost growth,” said Beth Umland, Mercer’s director of research for health and benefits.

Mercer cautioned that the projections are preliminary. Meanwhile, it seemed apparent that 2014 health insurance costs to employers would rise more than the 4.1 percent cost increase for 2012. The expected increase for employers in 2013, still to be finalized, was 5 percent.

One of the key strategies employers are using to manage cost growth is implementing consumer-directed health plans, which give employees financial incentives and resources to seek more cost-effective care and are typically paired with an employee-controlled account

Tracy Watts, senior partner and Mercer’s leader for health reform, said that for some employers, “slower growth in the cost of coverage will be overshadowed by additional costs from higher enrollment and fees.”

One factor that will increase some large employers’ costs is the reform act requirement that they offer coverage to employees who work 30 or more hours a week.

Industries with a heavy share of part-time workers “will be the hardest hit by this rule,” Mercer said. About half of employers in retail and hospitality currently do not offer coverage to all employees working 30 or more hours per week.

“Some employers will minimize the number of newly eligible employees by cutting back on hours for at least a portion of their workforce – 11 percent of all large employers say they will do so,” Mercer said.

When asked to estimate the cost of higher enrollment and new fees, about half of the employers surveyed say they will spend at least 2 percent more on health benefits in 2014 – over and above the normal increase in cost.

The Mercer survey found only 5 percent of large employers expecting to end their health care coverage plans for employees within the next five years. But about 20 percent of employers with fewer than 200 employees said it was likely they would terminate their plans.

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