Employers Hold Down Health Plan Cost for 2019

Average health care deductible nearly $1,500 for individual coverage

September 20, 2018
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updated on October 30, 2018

Employers' health care spending increases will slow again next year, while employees' share of plan expenses holds steady, new reports indicate.

Based on 1,566 preliminary responses to its National Survey of Employer-Sponsored Health Plans, HR consultancy Mercer projects that employers making plan changes will spend on average 4.1 percent more per employee for health benefits in 2019. If they didn't make any changes to their health care plans, employers said their own costs would increase 5.3 percent.

(Click on graphics to view in a separate window.)


Size Matters

The typical employer in Mercer's survey has 500 or more employees, and "the 4.1 percent increase figure can obscure significant differences between large and small employers," said Beth Umland, director of Mercer's health and benefits practice.

Last year, when Mercer weighted its findings to be nationally representative of U.S. employers, the firm reported that:

  • 34 percent of employers with 10 to 499 employees saw their health plan costs increase by more than 10 percent.
  • Only 11 percent of employers with 20,000 or more employees experienced similar double-digit increases.

Mercer will release employer-size-based findings for 2018 in its full survey report later this year.

Update

Mercer released additional survey findings on Oct. 30, showing that in 2018:

  • Among smaller employers (those with 10-499 employees), health plan costs rose by 5.4 percent on average.
  • Midsize and large employers with 500 or more employees held cost growth to 3.2 percent.

Mercer-10-18(2)c.jpg

Source: Mercer National Survey of Employer-Sponsored Health Plans. 


At small businesses, benefits are typically less generous, and therefore less expensive, than at larger firms. When faced with 2018’s big cost increases, many smaller employers moved to high-deductible consumer-directed health plans, which cost them 13 percent less, on average, than a traditional preferred provider organization (PPO) plan, Mercer found.

When health benefits are comparable, small employers often pay more because they lack the buying power of big employers. On average, small businesses paid about 8 to 18 percent more than large firms for the same health insurance plan, according to the National Conference of State Legislatures. Health insurers may charge different premiums to small employers based on the employer's industry or on the employer's prior health claims.

Eased regulations for association health plans are intended to make it easier for small businesses to band together to buy health insurance in the large-insurance market, without some of the regulatory requirements that individual states and the Affordable Care Act impose on smaller employers.

Another 2019 Forecast

In August, the National Business Group on Health's (NBGH's) 2019 Large Employers' Health Care Strategy and Plan Design survey, based on responses from 170 large U.S. employers, projected that the total cost of providing medical and pharmacy benefits will rise 5 percent for the sixth consecutive year in 2019.

Including premiums and out-of-pocket costs for employees and dependents, NBGH estimated that the total cost of health care for large group plans to be $14,099 per employee this year, rising to an average of $14,800 in 2019. Large employers will cover roughly 70 percent of those costs; employees will bear about 30 percent, the survey showed.

Money-Saving Steps

In past years, common employer cost-control tactics included raising deductibles and offering less-generous plans. For 2019, however, fewer than half of the responding employers (44 percent) will be making these types of changes, Mercer found. Instead, employers are adopting new technology-based initiatives to address the root causes of higher health care expenses without cutting benefits or increasing the financial burden on employees.

The savings "are not solely coming from shifting cost to employees," said Tracy Watts, senior partner and Mercer's leader for health reform. "It suggests that there is a quiet revolution going on in organizations as they deploy more innovative health benefit strategies—and that these have started to pay off."

The study highlighted three strategies:

  • Target specific health problems. More than half of employers with 500 or more employees (58 percent) now offer one or more "point solutions"—high-tech, high-touch programs designed to help members with specific health issues. A targeted program for people with diabetes, for example, might offer both coaching and an interactive glucose monitor that can transmit data to a provider. Success is measured in improvement in the quality of life and fewer trips to the emergency room.
  • Make it easy to engage. Currently, 18 percent of employers with 500 or more workers put all or most of their benefit offerings on a single, fully integrated platform. Another 19 percent say they are working toward full integration. Like the modern, online shopping experience, employees can easily engage with health and well-being vendors and find the resources they need.
  • Mine health plan and employee data for actionable insights. Most employers with 500 or more employees (77 percent) already use a data warehouse or get the data they need from plan vendors to inform their health plan strategy. But 16 percent of these employers are further ahead, using predictive analytics to identify future opportunities to improve health plan performance—or even health outcomes.
    For example, claims data can be continuously scanned for clusters of services, such as multiple trips to a chiropractor followed by a back MRI, which may indicate that a plan member might be heading toward a back surgery. Timely outreach could help this member avoid unnecessary back surgery or choose to have the operation done in a high-quality, cost-efficient setting.

"Employers have realized that it's up to them to solve the problems of high cost, inconsistent quality and low satisfaction that plague the U.S. health care system," said Renya Spak, leader of Mercer's Center for Health Innovation. "Without question, technology is going to be part of just about every meaningful solution."

Deductibles Near $1,500 for Individual Coverage

A new report from the nonprofit International Foundation of Employee Benefit Plans (IFEBP), Employee Benefits Survey: 2018 Results, examined deductibles among workers enrolled in employer-sponsored health care plans. The report found that these employees will pay this year, on average, $1,491 with single coverage or $2,788 with family coverage.

Deductible amounts varied based on the type of plan an employee is enrolled in:

  • For employees with traditional coverage, such as in a PPO plan, average deductibles were $932 for single coverage and $1,931 for family coverage.
  • For employees in a high-deductible health plan (HDHP), average deductibles were $2,296 for single coverage and $4,104 for family coverage.


The IFEBP report was based on responses from 677 HR and benefits professionals and administrators across a range of industries and employer sizes.

Cost-Sharing Holds Steady

The IFEBP report also found that employees are paying 23 percent of their premium for single coverage and 31 percent for family coverage, an increase of less than 1 percent over the previous four years.

Employers often offer more than one type of plan, the study showed:

  • PPOs are the most common plan type, offered by 73 percent of employers.
  • HDHPs with a health savings account (HSA) continue to grow in prevalence—59 percent of employers report they offered an HDHP with an HSA this year, up from 46 percent in 2014.
  • HMOs, health maintenance organization plans, were offerred by just over 26 percent of employers.

"With nearly 3 in 5 employers now offering high-deductible health plans, employees need to take the time to fully understand these types of plans," said Julie Stich, associate vice president of content at the IFEBP. "HDHPs involve lower premiums but higher deductibles, so individuals need to take a look at both their financial situation and their health needs for the upcoming year in determining which plan is best for them."

Another View on Deductibles

The nonprofit Kaiser Family Foundation's 2018 Employer Health Benefits Survey report, released Oct. 2, found that on average:

  • For family coverage, premiums rose 5 percent to average $19, 616 this year, with workers contributing $5,547.
  • For individual coverage, premiums rose 3 percent to $6,896, with workers contributing $1,186.
  • A quarter (26 percent) of all covered workers are now in plans with a deductible of at least $2,000, up from 22 percent last year and 15 percent five years ago.
  • Among covered workers at small firms with fewer than 200 workers, 42 percent face a deductible of at least $2,000.

The annual survey was conducted from January to July 2018 and included 4,070 randomly selected, nonfederal public and private firms with three or more employees. 

Smaller Hike in Drug Prices

Prescription drugs get more expensive each year, but that rate of increase has slowed in the last several years, according to the 2019 Segal Health Plan Cost Trend survey. Conducted earlier this year, the HR consultancy's 22nd annual survey of managed care organizations, health insurers, pharmacy benefit managers and third-party administrators found that:

  • Prescription-drug cost increases are no longer in the double digits and are closer to medical cost rates.
  • Specialty drugs, which are a small share of total prescriptions but account for more than one-third of employers' pharmacy expenses, are still rising at double-digit rates. This category includes biologics derived from living cells and other high-cost treatments that are often injected or infused in an oncologist's office.

"Prescription drugs account for 20 to 25 percent of [health] plans' annual expenditures," said Eileen Flick, senior vice president and director of health technical services at Segal. While the slowdown in rising costs is good news, plan sponsors should continue to control this expense by using specialty pharmacy-management tools and intensifying pharmacy-management programs, she advised.

Related SHRM Articles:

Can Tech Tools, Incentives and Advice Inspire Health Care Shopping?, SHRM Online, October 2018

For 2019, Employers Adjust Health Benefits as Costs Near $15,000 per Employee, SHRM Online Benefits, August 2018

High-Deductible Plans More Common, but So Are Choices, SHRM Online, February 2018

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