Health Plan Cost Increases Averaged 3.3 Percent In 2013: Aon Hewitt

In 2013, U.S. companies and their employees saw the lowest health care premium rate increases in more than a decade, according to research from consultant Aon Hewitt. After plan design changes and vendor negotiations, the average health care premium rate increase for large employers in 2013 was 3.3 percent, down from 4.9 percent in 2012 and 8.5 percent in 2011. In 2014, however, average health care premium increases are projected to move back to the 6 percent to 7 percent range, the study noted.

Aon Hewitt’s analysis showed the average health care cost per employee was $10,471 in 2013, up from $10,131 in 2012. The portion of the total health care premium that employees were asked to contribute toward this premium cost was $2,303 in 2013, compared to $2,200 in 2012. Meanwhile, average employee out-of-pocket costs, such as copayments, coinsurance, and deductibles, increased 12.8 percent ($2,239) in 2013, compared to just 6.2 percent in 2012 ($1,984).

For 2014, average health care costs are projected to increase to $11,176 per employee. Employees will be asked to contribute 22.4 percent of the total health care premium, which is $2,499 for 2014. Average employee out-of-pocket costs are expected to increase to $2,470. These projections mean that over the last decade, employees’ share of health care costs—including employee contributions and out-of-pocket costs—will have increased almost 150 percent from $2,011 in 2004 to $4,969 in 2014.

On average, Aon Hewitt forecasts that companies will see 2014 cost increases of 7.5 percent for health maintenance organization (HMOs) plans, 6.5 percent for preferred provider organization (PPOs) plans, and 6.5 percent for point-of-service (POS) plans. That means that from 2013 to 2014, the average cost per person for major companies is estimated to increase from $10,880 to $11,696 for HMOs, $10,222 to $10,887 for PPOs and $11,450 to $12,194 for POS plans.

“There are many factors that contributed to the lower rate of premium increases we saw over the past two years that we don’t expect to continue in the long-term. These include the lagged effect from the economic recession on health care spending and continued adjustments as employers and insurers phase out the conservatism that was reflected in earlier premiums due to uncertainty around economic conditions and health care reform. Additionally, employers and insurers will now be subject to new transitional reinsurance fees and health insurance industry fees,” said Tim Nimmer, chief health care actuary at Aon Hewitt. “While we are seeing pockets of promising innovation in the health care industry, we expect to see 2014 premium increases shift back towards the 6 percent to 7 percent range overall.”

Employer actions. “Health care remains a top priority for U.S. employers, and most are taking action to prepare for increasing cost, risk and change,” said Jim Winkler, chief innovation officer for the U.S. Health and Benefits practice at Aon Hewitt. “As the health care industry continues to evolve, employers realize that a traditional ‘managed trend’ approach will be less effective in mitigating costs increases over time. Instead, they are exploring innovative new delivery approaches, requiring participants to take a more active role in their own health care planning, and holding health care providers more accountable to reduce unnecessary expenses and create more efficiency in the way health care is purchased.”

Aon Hewitt found that 72 percent of employers focus their health care strategy primarily on programs that improve health risk and reduce medical costs. As the health care landscape continues to evolve, employers will look to reduce costs using a mix of traditional and non-traditional approaches, the study noted. Among these include the following:

Innovative approaches. One new approach are private health exchanges which help organizations offer employees health care choice while lowering future cost trends and reducing administrative burden. Aon Hewitt found that about 28 percent of employers plan to move into a private health care exchange over the next three-to-five years.

Plan design strategies. Consumer-driven health plans (CDHPs) have surpassed HMOs as the second most popular plan option (behind PPOs). The survey found that while just 10 percent of companies offer CDHPs as the only option in 2013, another 44 percent are considering it in the next three to five years.

Eligibility. Many employers are reassessing the eligibility requirements for employees and dependents to enroll in coverage, according to Aon Hewitt. Specifically, 54 percent of employers are considering reducing subsidies across all dependent tiers in the next three-to-five years. In addition, 69 percent of employers have implemented or plan to implement surcharges for adult dependents who have coverage options elsewhere.

Cost sharing. In 2013, employees’ share of the overall health care premium is 22 percent, compared to just 18.6 percent a decade ago. Additionally, Aon Hewitt found that 47 percent of employers have increased participants’ deductibles and/or copayments in the past year, and another 43 percent are considering doing so in the next three-to-five years.

Wellness programs. Employees can expect to see more employers offering programs that encourage them to take a more active role in managing their health, the study found. For example, 75 percent of employers offer health risk questionnaires and 71 percent offer biometric screenings such as blood pressure and cholesterol.

The data is derived from the Aon Hewitt Health Value Initiative database, which captures health care cost and benefit data for 516 large U.S. employers. For more information, visit <a href=””></a>.

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