Health Care Costs Expected To Increase 5.1 Percent In 2013: Towers Watson

In 2013, average total health care costs per active employee are expected to reach $12,136, up 5.1 percent from $11,457 in 2012, according to research from consultant Towers Watson and the National Business Group on Health (NBGH). The 2013 Employer Survey on Purchasing Value in Health Care noted that this is the lowest increase in 15 years, but only slightly lower than the 5.2 percent increase recorded in 2012.

Employers will contribute $9,248 of the premium in 2013, and employees will pick up the remaining $2,888. Employers contribute 32 percent more than they did five years ago, Towers Watson/NBGH noted, and employees contribute over 42 percent more. In addition to premium increases, companies anticipate that employees’ out-of-pocket expenses at the point of care will rise to 18.4 percent of total allowed charges in 2013, compared with 17.8 percent in 2012 and 15.9 percent in 2011. Altogether, the share of total health care expenses, including both premium and out-of-pocket expenses paid by employees, is expected to be 36.9 percent in 2013. The study noted that this means that for every $1,000 in health care expenses in 2013, employees pay $369 for premiums and out-of-pocket costs, and employers pay the remaining $631.

Over the next five years, 85 percent of employers say their strategy for employee cost sharing for health care coverage will be an important component of their overall strategy. However, confidence that they will continue to offer health care benefits ten years from now remains low (26 percent), suggesting that employers are uncertain about the direction of the marketplace in the coming years. In fact, Towers Watson/NBGH found that 92 percent of employers anticipate at least modest changes in the health care marketplace over the next five years, and nearly half expect significant changes (44 percent) or a complete transformation (3 percent).

The survey also found the following:

CDHPs. Towers Watson/NBGH found that 66 percent of companies now have a consumer-driven health plan (CDHP) in place, and another 13 percent expect to add one in 2014. Total-replacement CDHPs are also on the rise: nearly 15 percent of companies with a CDHP use a total-replacement CDHP, up from 7.6 percent in 2010. Over the same period, median enrollment in CDHPs has nearly doubled, increasing from 15 percent in 2010 to nearly 30 percent in 2013. The survey also found that nearly one-quarter of all respondents may offer a CDHP as their only plan option in 2014 if they follow through with their current plans to make that change.

Best performers. Employers whose costs have grown over four years at or below the Towers Watson/NBGH median, or “best performers,” had an average trend of 2.2 percent. The best performers’ strategies focused on efforts to contain both their costs and their employees’ costs so they have a greater share of their budget to devote to other aspects of their rewards, including salary increases and retirement, with an emphasis on value and effectiveness in achieving their attraction and retention goals.

Retiree health benefits. Employer subsidies for retiree medical coverage have sharply declined over the last two decades, with only 15 percent of companies offering them to newly hired employees in 2013. Those that continue to provide some level of financial commitment are increasingly shifting to account-based designs.

The survey contains responses from 583 organizations. For more information, visit

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