Employers Adjust Health Benefits for 2015

Survey shows costs up 6.5% next year without plan changes; 5% with changes

By Stephen Miller, CEBS August 15, 2014

Health care benefit costs at large U.S. employers are expected to increase 6.5 percent in 2015 on average, slightly lower than this year’s rate of increase. Most employers, however, say they will be able to stem increases even more as a result of changes they are making to their benefit plans, according to an annual survey by the National Business Group on Health (NBGH), a nonprofit association of large U.S. employers.

In one of its most significant findings, the survey revealed that the number of employers offering workers a consumer-directed health plan (CDHP) as the only health benefits option is expected to surge by nearly 50 percent next year.

The projected 6.5 percent increase is slightly lower than the 7 percent increase employers would have experienced this year had they made no changes to their plan design. However, employers expect to keep increases to 5 percent next year after making changes to their plans, such as increasing cost-sharing provisions, implementing and expanding CDHPs, and broadening their use of wellness incentives.

The NBGH findings are roughly in line with a PricewaterhouseCoopers’ forecast released in June, which projected health costs would rise 6.8 percent in 2015, but after accounting for likely changes in benefit design, there would be a net growth rate in health benefit costs of 4.8 percent.

“Just to put that in perspective, if you’re a large company that is now spending half a billion dollars on health care costs, a 5 percent increase represents an added cost of $25 million,” said Brian Marcotte, NBGH president and CEO, at an Aug. 13, 2014 briefing in Washington, D.C. “That’s $25 million that you will have to find the means to offset in your budget. So while the increase is somewhat less than we’ve experienced in the past, it’s still a significant increase. Despite the many distractions that the Affordable Care Act has created, large employers haven’t lost sight of the fact that rising health care costs remain a significant issue that needs to be constantly addressed.”

The NBGH’s survey, based on responses from 136 of the nation’s largest corporations, was conducted in June 2014.

Explaining why the projected cost increases in employer-provided plans is somewhat lower than reports of cost increases in the Affordable Care Act’s marketplace-based plans, which vary by state but typically are upward of 7 percent, Marcotte pointed out that “employer coverage is more stable than coverage through the exchanges,” and that there is “still jockeying in the market” as insurers try to understand and price the risk of exchange-based plans.

Cost-Controlling Steps

The survey found that employers are making numerous changes to their benefit designs in an effort to control costs. In 2015 employers are planning actions in the following areas:

Consumer engagement tools. Companies will add or expand tools to encourage employees to be better health care consumers (cited by 73 percent of respondents). For instance, in 2015 price transparency tools for selecting care providers based on cost and quality ratings, and online decision-support tools for comparing plans and estimating costs, will both be offered by 71 percent of large employers.

Consumer-directed plans. Many employers will implement or expand account-based CDHPs (57 percent) next year. Almost one-third (32 percent) say they will offer a full-replacement CDHP as their only benefit plan option, compared with 22 percent this year. Relatedly, 30 percent plan to eliminate one or more high-cost plans from their available options, while 10 percent plan to adopt a defined benefit health care model.

Wellness programs. Adding or expanding wellness program incentives or disincentives (53 percent).

Spousal coverage. Some companies plan to reduce spousal subsidies or implement spousal surcharges (37 percent). Next year, 29 percent will have in place a surcharge for spouses who can obtain coverage through their own employer, 3 percent will require spouses to purchase health insurance through their own employer when available, and an additional 3 percent will exclude spouses if the coverage offered through their own employer is essentially similar.

New delivery models. Over a quarter of respondents are adding or expanding efforts to encourage employees to use high-performance networks (also known as “narrow networks”), accountable care organizations, designated centers of excellence or similar delivery models (27 percent). Just over one-fourth of employers (26 percent) plan to include a narrow network in at least one of their plans next year, for example.

Specialty pharmacy benefits. Most employers (74 percent) will require step therapy—first trying less-expensive medications to manage the employee’s condition—before authorizing high-cost specialty pharmacy medications. Also pervasive are utilization management programs (72 percent). On the rise: one third (33 percent) will use a freestanding specialty pharmacy to cover these prescriptions next year, while 29 percent will only approve coverage for a 30-day initial supply to see if the medication is effective.

Weight management. Nearly three-fourths of respondents (73 percent) will cover surgical interventions for the treatment of severe obesity next year while 41 percent will cover FDA-approved medication, both slightly up from this year.

More controversially, many large employers (16 percent) will offer a low-value or "skinny" plan as an option in 2015, the survey found. Skinny plans do not meet the ACA's tests for minimum value and affordability.

2015 Employee Contributions

Employees of large organizations will be responsible for approximately 20 percent of their monthly health premium while employers continue to cover 80 percent of the costs.

All plan types

Preferred provider organizations (PPOs)

Consumer-directed health plans (CDHPs)

Employee % of premium









Family coverage




In-network deductibles





Family coverage




Source: National Business Group on Health

Mixed Views on Private Exchanges

Interest in private health exchanges is growing, albeit slowly, the survey found. By next year, 3 percent of large employers will provide their active employees with health insurance through a private exchange while 35 percent said they are considering doing so for 2016 or beyond.

Meantime, 14 percent of respondents are partnering with a private exchange for their retirees, an increase from 10 percent last year. Another 7 percent are planning to move retirees to private exchanges in 2015.

The survey, however, revealed mixed views from employers regarding their confidence that private exchanges will perform better than their own benefit plan:

77 percent are confident in the exchanges’ ability to provide more choice of plans.

51 percent said exchanges will do a better job complying with regulations.


Only 17 percent are confident that exchanges do a better job of engaging employees in better health care decision-making.

Only one in 10 believe exchanges will control costs better than their own plans.

“Employers are clamoring for information and help in understanding private exchanges and whether they make sense for their organizations,” said Marcotte. “The proliferation of private exchanges is presenting employers with an option but one that employers need to ask questions [of] and study carefully. For example, employers will want to determine whether a private exchange can manage costs and care more efficiently than what they are currently doing.”

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.

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