U.S. employers expect rate of increase in health care costs in 2015 to remain low but well above inflation

Employers expect a 4.1 percent rate of increase in the cost of employer-sponsored health care benefits in 2015 — the lowest in 15 years but well above inflation, according to an annual survey by Towers Watson and the National Business Group on Health (NBGH). The survey of 487 large U.S. employers also found that while employers remain concerned about the cost and effectiveness of their programs, they are more committed to providing some form of health care coverage to employees over the next 10 years than they have been in recent years. Employer confidence in offering health care coverage 10 years from now has nearly doubled to 44 percent today, from 25 percent in 2014.

The findings of the 20th annual Towers Watson/NBGH Best Practices in Health Care Employer Survey point to a growing affordability challenge for employees, especially for lower-wage workers. Health care costs for 2015 are expected to average $12,041 per employee, up from $11,567 in 2014. On average, employees will pay 22.2 percent of total premium costs in 2015, which in payroll deductions translates into an average employee contribution of $2,676, or $223 a month.

“Against the backdrop of sluggish economic growth and low inflation, which limit the degree to which companies can raise prices on goods and services, employers continue to aggressively manage their health benefit plans to rein in costs,” said Randall K. Abbott, a North American leader and senior strategist in Towers Watson’s Health and Group Benefits practice. “By and large, employers have done a good job managing costs in recent years. Despite this success, the Patient Protection and Affordable Care Act’s excise tax looms ahead in 2018, and four out of five employers now identify changes to health and pharmacy plan designs as their most important strategic priority.”

Employer actions taken and planned include:

Curbing the high cost of specialty pharmacy through new coverage/utilization restrictions: 53 percent of employers have done so already; another 32 percent are likely to by 2018.

Adopting spousal surcharges: 27 percent of employers have implemented; could rise to nearly 60 percent in three years.

Using a defined contribution strategy instead of defined benefit: 20 percent today; expected to double by 2018.

Offering more customization by adding voluntary benefits: 34 percent today; could reach 70 percent by 2018.

Other findings from the survey include:

Employers have nearly universally adopted account-based health plans (ABHPs). Eighty-two percent of companies offered an ABHP in 2015, and another 4 percent expect to add an ABHP for the first time in 2016. Health savings accounts (HSAs) are the dominant model, with more than 70 percent of companies offering an ABHP with an HSA.

Employers view a healthy and productive workforce as a business imperative. Employer concerns about employee well-being are prompting them to consider further changes to their health benefit plans and workforce health strategies. These concerns include health risks arising from lifestyle choices, lack of employee engagement in their own well-being and participation in wellness programs; and concerns about employee financial health.

Employers are transitioning to value-based payment strategies. Over 70 percent of employers identify reimbursement methodologies that are based on cost, quality, improved efficiency and better outcomes as important to consider in selecting health plan vendor partners.

SOURCE: Towers Watson

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