Health Benefit Cost Growth Expected to Slow in 2016

While employers will continue to shift healthcare costs to employees, a new report found that the underlying cost growth, which employers would expect if they did not make changes such as raising deductibles or switching carriers, will slow in 2016.

Without making those changes to their medical plans, cost would rise by 6.4% in 2016 compared with 7.1% in 2015, according to a survey by benefits consultant Mercer. After making those planned changes, employers predict health benefit cost per employee will only increase 4.2% in 2016.

“While health benefit cost growth is still well above CPI [cost performance index], the good news—for employers and employees—is that employers don’t have to trim as much to get cost increases to a more reasonable level,” Tracy Watts, senior partner and Mercer’s National Health Reform Leader, said in a statement.

When Mercer first began collecting this information in 2005, employers had said cost would increase 10% with no changes and the actual average increase after changes was 6.1%.

Mercer estimated that a third of employers are on track to reach the Affordable Care Act’s excise tax on high-cost plans, slated to go into effect in 2018, and as such more than half (54%) plan to make changes to their programs in 2016.

Some possible changes include adding a consumer-driven health plan (CDHP) or taking steps to increase enrollment in an existing CDHP. One-fourth plan to make these changes and 41% have already done so. In addition, 21% are considering eliminating healthcare flexible spending accounts and 23% are considering moving to a private benefits exchange.

Finally, nearly half (42%) are considering programs to improve employee health and well-being.

“It may be tough to measure, but a lot of employers believe investments in programs to improve employee health have paid off in medical plan savings,” Beth Umland, Mercer’s director of Research for Health and Benefits, said. “While there are many opinions about why we’re seeing a slow-down in benefit cost growth nationally, efforts to educate, engage and support employees in improving their health should make every employers’ to-do list.”

In February, The American Journal of Managed Care published a commentary about company wellness programs, discussing that there is no published evidence that these programs—whose main focus is usually weight control—have any positive effect.

“It is reasonable to assume that wellness savings and obesity reduction savings should correlate closely, but corporations have not found savings in wellness programs,” the authors wrote.