We all know that the cost of health benefits continue to increase but what are the current cost trends and how are employers reacting to the increases? Large employers (500+ employees), who are often the agents of change, are increasing their implementation of Consumer Driven Health Plans and Health Assessment Plans.
But what are small and mid-size employers doing to help their bottom line? To get the answer let's first look at the results of Mercer's recent national survey of employers with 10 or more employees. The survey outlines the trends in health cost increases, implementation of Consumer Driven Health Plans (HSA and HRA plans) and up-take of health management programs.
The following are a few highlights of the survey results.
Plan Costs - Average Cost of Employee Health Benefits
Plan Design - Implementation of Consumer Driven Health Plans
- $9,702 was the average annual cost of health benefits per employee for small/mid size employers (10 - 499 employees)
- In 2011, cost of health benefits increased by 3.6% for large employers (500+ employees) and by 9.9% for small/mid employers (10 - 499)
Health Management - Employee Incentives
- 20% of employers (10 - 499 employees) are offering a Consumer Driven Health Plan, an increase from 16% last year
- Consumer Driven Health Plans with an employer funded Health Savings Account are, on average, 20% less expensive per employee than traditional PPO coverage
- 87% of large employers will add or strengthen programs or policies to encourage more health-conscious behavior
- 29% of small/mid-size employers (10 - 499 employees) are implementing Health Assessment programs
- Common participation incentives include lowering employee premium contribution at an average rate of $240 per year for employee only coverage
Large employers experienced a cost increase at a rate of over 6% less than small/mid-sized employers. If we're trending costs across the country why are large employer's experiencing a significantly smaller rate of cost increases than small/mid-size employers?
One reason is the result of the majority of large employers having self-funded health plans. Here are a few cost-savings attributes of a self-funded plan.
- Employers can experience a direct reduction in claim costs when making a benefit change such as increasing deductibles or limiting or excluding certain benefits
- Through the implementation and the on-going administration of a Health & Wellness program, high-risk employees have their diseases managed. This can result in overall reduction of high-cost ER visits or extended hospital visits for personal care mismanagement.
As a small/mid-size employer, can I self-fund my health plan so I can reap the same benefits of health management? Now the answer is "Yes". Employers down to 25 employees can self-fund their health plan and implement a health management program so they can begin to manage their own health benefits costs. Just as you're looking to build an investment strategy to beat the stock market, you (even as a small employer) can build a health plan strategy to beat the trend of health care costs.