Health benefit cost per employee in 2016 - Mercer survey

Health benefit cost per employee in 2016 - Mercer survey

The winning streak continues as employers predict another year of low health benefit cost growth

  • September 16, 2015
  • United States, New York

·         Employers project that per-employee health benefit cost will rise by an average of 4.2% next year after they make planned changes

·         For a fifth straight year, employers will hold cost growth to less than 5%

·         Consumer-directed plans remain a key strategy for avoiding the excise tax

Early responses from a major Mercer survey still in the field show employers predicting that health benefit cost per employee will rise by 4.2% on average in 2016 (see Fig. 1) after they make planned changes such as raising deductibles or switching carriers. This is consistent with actual cost growth in 2014 (3.9%) and the expected cost growth for 2015.

What is surprising – and encouraging – is the slow-down in the underlying cost growth, the increase employers would expect if they made no changes to their medical plans. Employers said cost would rise by an average of 6.4% in 2016 if they made no changes. That’s down from 7.1% for 2015 and is the lowest rate of underlying cost growth seen since Mercer began collecting this information in 2005, when employers said cost would rise 10% if they made no changes (after changes, the actual average increase was just 6.1%).

“While health benefit cost growth is still well above CPI, the good news – for employers and employees -- is that employers don’t have to trim as much to get cost increases to a more reasonable level,” says Tracy Watts, Senior Partner and Mercer’s National Health Reform Leader.

These results are based on responses to Mercer’s National Survey of Employer-Sponsored Health Plans from more than 1,200 employers who submitted the survey by September 1, 2015.

Despite the slower cost trend, more than half of the survey respondents (54%) plan to make some changes to their programs in 2016.  “Employers are well aware that the ACA’s excise tax on high-cost plans is slated to go into effect in 2018, even as calls for reform or repeal are mounting,” says Ms. Watts.

Mercer has estimated that, based on plan cost reported in 2014, about a third of all employers (31%) were on track to reach the excise tax threshold.

The need to keep cost under the threshold has already prompted employers to make significant changes. In fact, one fourth (25%) of survey respondents say they are considering adding a CDHP or taking steps to increase enrollment in an existing CDHP specifically to help avoid the tax –on top of the 41% that have already done so.  Other ways of avoiding the excise tax include eliminating health care flexible spending accounts (21% of respondents are considering this) and moving to a private benefits exchange (23% are considering).

“Our experience with our private benefits exchange, Mercer Marketplace, has been that when employees have a range of medical plan choices and a decision support tool to help them really understand the trade-off between paycheck deductions and cost-sharing, they often decide on a lower level of coverage than they had before,” says Ms. Watts. 

A whopping 42% of respondents say they are considering adding or expanding programs to improve employee health and well-being – specifically as a way to avoid the excise tax.

“It may be tough to measure, but a lot of employers believe investments in programs to improve employee health have paid off in medical plan savings,” says Beth Umland, Mercer’s Director of Research for Health and Benefits. “While there are many opinions about why we’re seeing a slow-down in benefit cost growth nationally, efforts to educate, engage and support employees in improving their health should make every employers’ to-do list.”

About the survey

The results discussed here are preliminary findings from Mercer’s National Survey of Employer-Sponsored Health Plans 2015. The survey is still in the field and complete results, including the actual cost increase for 2015, will be released by the end of the year. The preliminary results discussed above are based on about 1,200 employers who responded by September 1; these results are not weighted and represent only the early responders. Ultimately, approximately 2,500 employers will participate in the survey and the final results will be weighted to be nationally projectable.

About Mercer

Mercer is a global consulting leader in talent, health, retirement, and investments. Mercer helps clients around the world advance the health, wealth, and performance of their most vital asset – their people. Mercer’s more than 20,000 employees are based in 42 countries, and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy, and people. With over 53,000 employees worldwide and annual revenue exceeding $11 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. For more information, visit Follow Mercer on Twitter @Mercer.