Monday, October 7, 2013

Fwd: qotd: Mercer update on changes in employer health benefits

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Subject: qotd: Mercer update on changes in employer health benefits
Date: Mon, 7 Oct 2013 12:17:43 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

October 1, 2013
Employers Hold the Line on Health Benefit Cost Per Employee in 2014

Based on early responses from a major survey conducted annually by
Mercer, employers expect health benefit cost per employee will rise by
4.8% on average in 2014

"The recession has been one factor behind slower cost growth, by
dampening utilization," said Beth Umland, Mercer's director of research
for health and benefits. "But employers have made fundamental changes in
their health benefit programs in recent years that have put the brakes
on unsustainable cost growth."
Employers estimate that if they made no changes to their current plans,
health benefit cost per employee would rise by 7% on average in 2014.

One of the key strategies employers are using to manage cost growth is
implementing consumer-directed health plans, which give employees
financial incentives and information resources to seek more
cost-effective care and are typically paired with an employee-controlled
account. Another is health management (or "wellness") programs focused
on improving workforce health. And an emerging trend for 2014 that is
expected to accelerate in 2015 is the use of private exchanges, such as
Mercer Marketplace, which make it easier for employers to offer a range
of medical plan options and voluntary benefits and which can be a tool
in cost management.

About a third of all large employer health plan sponsors (those with 500
or more employees) do not currently offer coverage to all employees
working 30 or more hours per week, as will be required under the
Affordable Care Act (ACA) beginning in 2015. Industries that rely
heavily on part-time workers will be the hardest hit by this rule. About
half of respondents in retail and hospitality currently do not offer
coverage to all employees working 30 or more hours per week.
Some employers will minimize the number of newly eligible employees by
cutting back on hours for at least a portion of their workforce – 11% of
all large employers say they will do so. But most employers affected by
the rule will simply open their plans to all employees working 30 or
more hours per week and brace for rising enrollment.

"Rising enrollment will be an even bigger issue in 2015 when the shared
responsibility penalty goes into effect," said Ms. Watts. "While some
employers are going ahead with plans to expand eligibility in 2014
despite the delay, most of those with the big part-time populations are
holding off and will feel the pinch in 2015."

Few large employers – just 5% – say it's likely they will terminate
their health plans within the next five years, even though public
insurance exchanges will provide another source of health coverage.
About a fifth of employers with fewer than 200 employees say it's likely
they will terminate their plans; employers of this size are much less
likely to offer coverage to begin with.

Under the ACA, beginning in 2018 employers will pay a 40% tax on the
cost of health coverage in excess of $10,200 for an individual or
$27,500 for a family. "This tax has been dubbed the 'Cadillac tax' but
that's really a misnomer," said Ms. Watts. "Health coverage can often be
expensive without being overly generous."
Based on cost data collected in 2011, Mercer estimates that about 40% of
employers would have to pay the tax on at least one plan if they made no
changes to current plan design. Nearly a third of all large employers
say they are taking steps in 2014 to avoid the tax in 2018 – in many
cases, by adding a high-deductible consumer-directed health plan or
taking steps to increase enrollment in an existing plan.

Comment: These preliminary findings just released by Mercer indicate
that employers will continue to take steps to reduce their own costs of
their health benefit programs, by shifting even more costs to their

One of the more shocking new numbers is that nearly a third of large
employers are taking steps in 2014 to avoid the 40 percent excise tax on
expensive plans - a tax that will be assessed in 2018. These expensive
plans do not have overly generous benefits, but they are expensive only
because health care has become so expensive. To avoid the tax, most
employers will be offering high-deductible, consumer-directed health
plans which expose employees to greater out-of-pocket expenses.

Although only 5 percent of large employers say that they will terminate
their plans within the next five years, the deterioration in coverage
will surely cause a backlash from those who need care and cannot afford
the out-of-pocket expenses. It may be that those who currently feel
secure with the plans they get through their work may be the ones who
will eventually clamor for single payer once they see how exposed their
plan revisions will leave them.

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