If employers left their employee medical plans static in 2010, they would see costs rise by nearly 9%. However, with more than half of all employers experiencing layoffs over the past year—and almost one-third anticipating future layoffs—doing nothing is not an option for most employers, according to a recent survey.
Mercer’s survey of 1,562 U.S. employer health plan sponsors indicates that respondents plan to shave three percentage points off their annual renewal rates through a variety of cost-saving actions, holding overall cost growth to 5.9% next year.
While the complete survey results won’t be released until later in the year, preliminary findings suggest that 31% say the economic recession has had a “strong negative effect” on their business, with another 49% experiencing a “somewhat negative effect.” Those most strongly affected by the recession report both a higher underlying cost trend (9%) for 2010 and a lower targeted cost increase (5.4%), on average, than those organizations that have not been affected by the recession (8.5% and 6.3%, respectively).
First line of defence
The favoured tactic used by employers against rate increases is to shift costs to employees, but this can present a tough challenge for employers that feel their employee cost-sharing requirements are already high. In 2010, 63% of respondents will again ask employees to pay a greater share of health plan costs, most commonly by requiring them to pay a higher portion of the monthly premium (40% of respondents) and/or by raising deductibles, co-pays/co-insurance or out-of-pocket maximums (39%).
Nearly one-fifth of respondents are eliminating high-cost or more generous health plan options as a way to move employees into lower-cost options, such as consumer-directed health plans (CDHPs). Many of these plans encourage employees to take cost into consideration when seeking healthcare services by allowing them to save account dollars they don’t spend in a given year for future needs.
“We’re expecting to see a real spike in 2010 in both the number of employers offering CDHPs and in the number of employees enrolling in them, as more employers become comfortable with the concept of offering a high-deductible account-based plan as one choice or their only choice,” explains Linda Havlin, worldwide partner at Mercer. “Employers see them as a way to provide more value to employees while at the same time managing cost.”
Other cost-cutting actions for 2010 include auditing plans and adding or renegotiating performance guarantees with health plan vendors.
“The good news is that employers are finding ways to keep health benefit cost increases stable through innovations that improve quality, participant experience and cost efficiency,” says Havlin. “In the most successful programs, employees are becoming more engaged in understanding their health risks and participating in lifestyle improvement and/or care management programs. There is a lesson here for policy-makers who are working on health reform: managing the overall cost requires a change-in-management framework. You need to continually evaluate what’s driving cost and uneven results, and then set about the tough task of changing participant and provider behaviour.”
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