Large employers project an increase in health care benefit costs in 2014

September 1, 2013

Large employers expect their cost of health care benefits to rise 7 percent in 2014, according to annual survey conducted by the National Business Group on Health, a nonprofit whose members include 66 Fortune 100 companies.

The anticipated uptick would mark the second straight year that costs have climbed that quickly, according to projections. A final calculation for 2013 won’t be available until after the year ends.

“Rising health care costs remain a serious concern of U.S. employers, especially in light of the slow-growing economy, the very low growth in wages and fears about forces that threaten to drive up costs even higher,” Helen Darling, the group’s president and chief executive, said at a press conference.

The organization asked large employers what they considered to be the most effective tactic for controlling health care costs. The biggest share, 36 percent, said their best option was implementing a consumer-directed health plan, one that typically uses personal health care spending accounts to cover routine expenses and relies on a high-deductible coverage for more costly care.

Large companies appear to be relying more on such coverage. The number of organizations that are poised to offer consumer-directed plans as the only option for employees ticked up to 22 percent from 19 percent the previous year. Still, the number of large organizations offering a consumer-directed plan as one of multiple options remained flat at 72 percent.

Wellness programs also registered as one of the more effective ways for large employers to manage costs.

“That’s a surprise,” Darling said. “That’s a big turnaround. As recently as five or eight years ago, no one really though this would be the direction that people would go,” Darling said.

As public exchanges open next year as part of the health care reform law, employers weighed in on how that might affect the populations that they cover. Only 12 percent said they expect current full-time employees to choose that coverage instead of the coverage provided by their employer.

But for other populations, the percentage was higher. Employers expected some 41 percent of former employees who rely on COBRA plans to make the switch, as well as 26 percent of retirees younger than 65 and 20 percent of part-time workers. Darling said this is likely because these groups might get a better deal on the exchanges.

Darling said the exchanges might be particularly attractive to workers in the retail and hospitality industries, where wages are often low and employment can be highly seasonal.

With open enrollment season around the corner at many large employers, Darling said it will be especially important for workers to pay attention to the materials they receive about their plans.

“Most employers are putting in some increases that will be balanced out by wellness credits,” Darling said. Companies typically offer wellness credits for activities such as getting a biometric screening or completing a tobacco cessation program.

Falls Church-based Inova Health System is one large employer that says it has had success with wellness programs that are structured to reward employees for good behavior. Inova has a points-based system for things such as having a gym membership, getting a flu shot or getting a health-risk assessment. The more points an employee gets, the greater reduction they get in their premiums.

The NGBH is an organization that aims to represent large employers’ perspectives on health policy topics. Its report was based on survey responses from 108 of its member organizations. The survey was conducted in June, meaning that it was gathered before federal officials announced that enforcement of the Affordable Care Act’s employer mandate would be delayed until 2015.

Still, Darling said the delay “doesn’t have a big effect” on what large employers plan to do in terms of their benefit offerings.

Sarah Halzack is a reporter and Web editor for Capital Business. She covers the local job market and the business of talent and hiring. She occasionally writes for other sections at the Post, most frequently in the form of dance reviews, dance features, book reviews and obituaries.
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