- Employers' desire to control health benefit cost growth has taken on a new urgency with the fast-approaching implementation of the excise or “Cadillac” tax, one of the Affordable Care Act’s (ACA’s) final provisions.
- Employer actions to lower exposure to the 40% excise tax, set for a 2018 launch, helped hold growth in health benefits cost per employee to just 3.8% in 2015 for a third straight year of increases below 4%, according to a recent survey from Mercer.
- According to Mercer's annual National Survey of Employer-Sponsored Health Plans, total health benefits cost averaged $11,635 per employee in 2015. Small employers were hit with higher increases than large employers, as cost rose by 5.9% on average among employers with 10-499 employees, but by just 2.9% among those with 500 or more.
In the survey, employers generally predicted that, in 2016, health benefits cost per employee will rise by 4.3% on average, an increase that reflects cost reduction changes. With no changes to their current plans, they estimate that cost would rise by an average of 6.3%. About half of all employers indicated that they would make changes in 2016.
“Employers are moving on several fronts to hold down health cost growth,” said Julio A. Portalatin, president and CEO of Mercer. “In the best scenarios, they’re addressing workforce health, restructuring provider reimbursement to reward value, and putting the consumer front and center by providing more options and more support. In other cases, the pressure to avoid the excise tax is leading to some cost-shifting, plain and simple.”
Some good news: early in the health reform debate, many small employers thought it was likely that they would drop their plans and send employees to the public exchange. But while 21% of employers with 50-499 employees in 2013 said they were likely to drop their plans within the next five years, the number fell to 15% in 2014 and to just 7% this year.
“Employers know that health benefits really influence how employees feel about where they work,” said Beth Umland, Mercer’s director of research for health and benefits. “They want to continue to offer coverage, and with cost growth holding below 4% they’re gaining confidence that they’ll be able to afford it.”