Employee Benefits and Health Care Reform and Health Care & Life Sciences and Health Care & Insurance

Employer costs surge despite low inflation

November 25, 2009

Employer groups, who had pinned their hopes on the Senate version of health care reform, are not happy with the bill brought to the floor Saturday.

But to understand why such groups as the U.S. Chamber of Commerce do not oppose the bills, consider these numbers: health care costs for employers rose 5.5 percent nationally this year—even in a year with zero inflation.

In Indiana, it was even worse, with health care costs increasing 6.6 percent.

Those data come from an annual survey of nearly 3,000 employers by Mercer Health & Benefits, a New York-based consulting firm. In Indiana, the firm interviewed 70 employers.

“You’ve got people worried about potential layoffs, so people run to the doctor,” said Bob Boyer, a principal of Mercer Health & Benefits in Indianapolis. He also noted that even people who lost their jobs could get coverage under COBRA legislation, which requires their former employers to contribute some to their health benefits.

The increases nationally were the smallest in a decade. But they also came because employers shifted more costs to their employees, particularly by raising deductibles. And employers plan more cost-shifting next year.

In Indiana, employers said health care costs would have risen 9.3 percent next year had they made no changes from their 2009 plans. As it is, costs are expected to rise 6.2 percent next year.

Already, health care costs per employee are about 4-percent higher in Indiana than the rest of the country, according to Mercer. Employers paid nearly $9,300 per employee this year.

Employers typically picked up 75 percent to 80 percent of those costs. But Boyer said he’s seeing that number move down to 70 percent, leaving workers to pick up a larger share.

“On the whole, these employers are under a lot of pressure,” he said.

But employers don’t see it as a viable option to drop health benefits. The percentage of employers offering health benefits remained unchanged at 65 percent. And 44 percent of employers who don’t offer health benefits now said they would if Congress approves fines for individuals who don’t have coverage.

Consumer-directed health plans gained in popularity among smaller companies, in large part because they cost employers about 20-percent less per employee than a typical preferred-provider organization plan. Among firms with fewer than 500 workers, 15 percent now offer a consumer-directed plan, up from 9 percent a year ago.

Among employers with more than 500 workers, 20 percent offer a consumer-directed plan.

The plans are far more popular in Indiana, with 42 percent of all employers offering one, Mercer’s survey found.

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