U.S. employers trying to hold line on benefit cost increases

A new Mercer survey of 1,100 employers found that fewer employers are going the grandfathered route, with just 53% keeping the grandfathered status for all their plans.

That means 47% of employers are choosing to make design and other changes to their benefits plans, such as raising deductibles and implementing coinsurance requirements.

Without making any changes, employers are faced with the possibility of double-digit cost increases to pay for new mandated programs such as extending coverage to employees’ adult children until age 26.

The average increase for a grandfathered plan would be 10.1%, according to the Mercer report.

In order to keep those costs down to an average of 5.9%, many employers are changing the structure of their benefits plans and asking workers to share more of the expense.

“Six percent seems to be employers’ collective comfort level,” says Beth Umland, Mercer’s research director for health and benefits. “For the past five years the actual cost per employee has risen by about 6% annually, even as the underlying trend has been running at about 9%. Employers have been working hard to keep it at that level, and they’ll have to work a bit harder in 2011 to achieve the same result.”

Overall, 57% of survey respondents said they will ask employees to pay at least a somewhat greater share of the cost of coverage in 2011.

Most of these will increase the cost of dependent coverage proportionally more than the cost of employee-only coverage. This is likely a response to the expected increase in the number of dependents enrolled once employers must extend coverage to children up to age 26.

Many employers are also taking a more preventative approach by implementing health management and wellness programs to prevent workers from getting sick in the first place.