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Group Health Care Plan Cost Increases Slow in 2009

One factor holding cost increases down, especially among smaller employers, was increased adoption of high-deductible, account-based consumer-driven health care plans, which have costs strikingly lower than more traditional plans.

November 19, 2009
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Group health care plan costs climbed an average of 5.5 percent in 2009, the lowest increase in more than a decade, as employers stepped up efforts to better control costs.

That 5.5 percent increase brought costs up to an average of $8,945 per employee, compared with an average of $8,432 per employee in 2008, according to a survey of nearly 3,000 employers released Wednesday, November 18, by Mercer of New York.

Costs rose an average of 6.3 percent in 2008; from 2005 through 2007, costs increased by an average of 6.1 percent in each of those three years.

“This is good news, and the cost increase is a better number than we might have expected,” said Linda Havlin, a Mercer worldwide partner in Chicago.

One factor holding cost increases down, especially among smaller employers, was increased adoption of high-deductible, account-based consumer-driven health care plans, which have costs strikingly lower than more traditional plans.

For example, 15 percent of employers with 10 to 499 employees in 2009 said they offered a CDHP linked to either a health savings account or health reimbursement arrangement, up from just 9 percent last year. And of those small employers that offer a CDHP, for 55 percent it is the only medical care plan they provide to employees.

The difference in costs between CDHPs and other plan designs is striking. CDHPs linked to HSAs cost an average of $6,393 per employee in 2009, or nearly $2,000 less per employee than preferred-provider-organization or point-of-service plans, according to the survey.

Next year, 18 percent of smaller employers said it is “very likely” they will offer a CDHP, while 24 percent of larger employers—those with at least 500 employees—said it is very likely they will offer a CDHP in 2010. This year, 20 percent of larger employers offered a CDHP.

Another important factor helping to keep costs more under control was increased employer adoption of health management programs, such as health risk assessment programs, which seek to identify employees’ health conditions so action can be taken to prevent those problems from worsening.

For example, 73 percent of employers with at least 500 employees said they offered a health risk assessment program this year, up from 65 percent in 2008, while 71 percent said they offered a disease management program in 2009, up from 66 percent last year.

The slowing of group health care plan costs also was the result of a longtime employer strategy—shifting more costs to plan participants. For example, among PPOs in which a deductible is imposed for in-network coverage, the average deductible for individual coverage climbed to $1,096 in 2009, up from $1,001 in 2008. As recently as 2004, the average deductible for individual coverage in PPOs in which a deductible was imposed was $686.

The National Survey of Employer-Sponsored Health Plans will be published in March. The report costs $600, and the report and tables cost $1,200. More information is available online at www.mercer.com/ushealthplansurvey.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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