Employer healthcare costs expected to rise in 2011

NEW YORK Against a backdrop of continued economic uncertainty, employer healthcare costs for active employees are projected to rise 8.2% after plan changes to an average annual cost of $10,730 in 2011, according to a recent survey of 466 large and midsize employers conducted by Towers Watson.

“Employees today are adjusting to historically lower-than-average merit pay increases, while at the same time facing higher healthcare contributions, co-pays and deductibles. Merit pay increases have gone up 16% while employee contributions have risen 49% over the last five years. This combination could adversely affect many employees and intensify the growing affordability crisis,” stated Ron Fontanetta, senior healthcare consultant with Towers Watson. “With employers also facing the challenge of steadily rising costs, plus the advent of healthcare reform, the need to rethink employer approaches to health care is greater than ever.”

According to survey respondents, 59% of employers planned to implement significant or moderate healthcare plan design changes in 2011, and two-thirds (67%) planned to do so in 2012.

“In light of the complexities around all of the regulatory guidelines and mandates, most employers are taking the time to understand the new legal environment before making too many long-term changes to their health benefit strategy,” said Randall Abbott, a senior healthcare consultant with Towers Watson. “Nonetheless, the earlier employers consider the strategic ramifications of the law and can act, the better they can assess their future role as healthcare benefit sponsors, and understand the implications on their business and employees.”

Many employers today, however, are not staying the course:

• By 2012, 64% of employers are projected to offer an account-based health plan — such as combining a high-deductible health plan with an employee-directed healthcare account, such as a health reimbursement arrangement health savings account — and 39% of employers are projected to have ABHP enrollment of more than 20%;

• As many as 62% of employers are projected to apply outcome-based incentives by 2012, shifting from incentives for employee participation in wellness programs to incentives for improvements in health metrics, for example. “Healthcare reform has reinforced employers’ commitment to wellness [health-management] programs,” Fontanetta said. “Employers today understand that one of the keys to controlling long-term healthcare costs is to provide employees with the tools to personalize and manage their health. They are also offering incentives to encourage employees to maintain their well-being and access to clinical support and advice”; and

 

• According to the survey, 86% of U.S. employers plan to increase efforts to encourage employees to engage in wellness/health promotion programs, with 65% already increasing or planning to increase incentives for these programs, and another 17% considering this action for 2012. Among specific health promotion programs, employers plan to increase efforts to encourage employees to engage in behavioral health programs (78%), biometric screenings (74%), health risk assessments (71%) and disease management programs (67%).