Large U.S. employers estimate their health care benefit costs will increase an average of 8.9 percent in 2011, up from an average increase of 7 percent in 2010, according to an August 2010 survey report by the National Business Group on Health, a non-profit association of large employers. The survey received responses from 72 of the nation’s largest corporations representing more than 3.7 million employees.
To help control cost increases, in 2011 employers are planning to use a wider variety of cost-sharing strategies that include:
• Increasing the percentage employees contribute to the premium (63 percent of respondents).
• Raising out-of-pocket maximums (46 percent).
• Raising in-network deductibles (44 percent).
• Raising out-of-network deductibles (40 percent).
• Raising co-pay/co-insurance for specialist care (21 percent).
• Raising co-pay/co-insurance for primary care (6 percent).
Shift to Consumer-Directed Health Plans
In addition, 61 percent of large employers will offer a consumer-directed health plan (CDHP) in 2011, typically a health savings account (HSA) or a health reimbursement arrangement (HRA).
The survey found a big spike in large employers moving to a full replacement CDHP (that is, offering employees only a CDHP rather than providing a CDHP as an option along with a traditional health plan). Of those offering a CDHP, 20 percent indicated that they already have or will move to a full replacement plan in 2011, up from 10 percent with a full replacement CDHP in 2010.
Of those providing coverage through a CDHP, most (64 percent) will offer a high-deductible plan combined with an HSA.
“Consumer-directed health plans are living up to their expectations as a way to help save employers money and put employees in greater control of their health care," said Helen Darling, president of the National Business Group on Health. "In fact, offering these plans was the most often-cited tactic by employers to control costs. We fully expect that employer interest in CDHPs, and especially full-replacement plans, will continue to increase in the future,” she said.
Among other survey highlights:
• 5 percent of respondents plan to drop retiree health coverage in 2011, and 60 percent are considering doing so.
• 41 percent offered premium discounts for completing health assessments, while 22 percent offered premium discounts for participating in tobacco cessation programs.
• 25 percent plan to raise the co-pay or co-insurance for retail pharmacy prescription drug benefits, while 21 percent plan to do the same for mail-order pharmacy benefits.
Higher Costs for Small Plans
Cost increases in 2011 are expected to be even higher for smaller health plans. According to the Council of Insurance Agents & Brokers’ Employee Benefits Market Survey released in June 2010, a plurality of U.S. health insurance agents and benefit brokers reported that group health plans cost increases in 2011 would be in the range of 11 to 20 percent for small accounts (those with 50 or fewer employees) and in the range of 6 to 15 percent for medium accounts (51 to 500 employees) and large accounts (more than 500 employees).
Impact of Health Care Reform
Provisions in the health care reform law enacted in March 2010 that are expected to contribute to higher plan costs in 2011 include the extension of adult-child coverage to age 26, the prohibition on lifetime limits on the dollar value of coverage, restrictions on annual limits, and (for non-grandfathered plans) a requirement to provide first-dollar coverage for listed preventive services (see Health Reform's Coverage Requirements Expected to Drive Premiums Higher).
Stephen Miller is an online editor/manager for SHRM.
Enrollees in Health Reimbursement Arrangements Spend Less, GAO Finds, SHRM Online Benefits Discipline, August 2010
Just the Stats: What's Known About Consumer-Driven Health Plans, SHRM Online Benefits Discipline, August 2010
Controlling Health Costs: Success Tips Shared, SHRM Online Benefits Discipline, July 2010
Increased Health Care Cost-Shifting Expected in 2011, SHRM Online Benefits Discipline, June 2010
Group Health Insurance Rates on the Rise for 2011, SHRM Online Benefits Discipline, June 2010
Employers Brace for Health Care Cost Increases, Remain Committed to Subsidizing Employee Coverage, SHRM Online Benefits Discipline, June 2010
Health Reform's Coverage Requirements Expected to Drive Premiums Higher, SHRM Online Benefits Discipline, April 2010
SHRM Online Benefits Discipline
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