Some upstate New York employers estimated their health-benefit cost per employee would rise 6.5 percent next year if they made no changes to their current plan. 

 

However, they expect to hold their cost increase to 5.3 percent by making alterations to plan design and/or plan vendors. That’s according to the National Survey of Employer-Sponsored Health Plans, that Mercer, a health-care consulting firm, conducts annually.

 

The numbers represent the percentage increase employers would expect upon renewing the plan they have this year, says Thomas Flynn, Mercer’s health and benefits leader for Upstate. He spoke with CNYBJ on Nov. 24.

 

Mercer is a wholly owned subsidiary of New York City–based Marsh & McLennan Companies (NYSE: MMC).

 

The results for upstate New York represent the responses of 46 local employers. 

 

Employers nationwide predict that in 2016 their health-benefit cost per employee will rise 4.3 percent on average, according to a news release Mercer issued Nov. 19. 

 

This increase reflects changes firms will make to reduce cost; if they made no changes to their current plans, they estimate that cost would rise by an average of 6.3 percent. 

 

However, about half of all employers indicated that they would make plan changes in 2016, Mercer said.

 

Controlling cost growth

The effort to control health-benefit cost growth has taken on a “new urgency,” Mercer said, with the fast-approaching implementation of the excise or “Cadillac” tax — one of the Affordable Care Act’s or Obamacare’s final provisions.

 

Employer efforts nationwide to reduce their exposure to the 40 percent excise tax, which goes into effect in 2018, helped hold growth in health-benefit cost per employee to just 3.8 percent in 2015, representing a third straight year of increases below 4 percent, according to Mercer.

 

The total health-benefit cost averaged $11,635 per employee among the 2,486 national respondents in 2015, according to the Mercer survey. This cost includes both employer and employee contributions for medical, dental, and other health coverage, for all covered employees and dependents.

 

Total health-benefit cost for active employees among the 44 upstate respondents increased 4.3 percent in 2015 to an average of $10,861 per employee. 

 

When Mercer pulled smaller employers (16 with less than 500 employees) out of the results, the firm found that large employers fared better with a 2.8 percent year-over-year change. Still, they’re paying $12,319 per employee annually this year.

 

Excise tax

Based on the current premiums in their highest-cost (or only) medical plan, an estimated 9 percent of upstate respondents will hit the excise-tax threshold in 2018 if they make no changes to the plan between now and then. 

 

Among the same group, 33 percent felt they would hit the threshold by 2022. 

 

Under this provision, if the aggregate cost of applicable employer-sponsored coverage provided to an employee exceeds a statutory dollar limit, which is revised annually, the excess is subject to a 40 percent excise tax, according to the website of the IRS.

 

Flynn indicated the figure is $10,200 for a single person’s premium and $27,500 for a family.

 

“Then every dollar above that, you’ll pay a non-deductible 40 percent excise tax,” says Flynn.

 

He also noted the numbers will index over time and that it’s “not a one-year deal.”

 

Based on their current premiums, Mercer estimates that 23 percent of large employers nationally have at least one plan with costs that will exceed the excise-tax threshold in 2018 if they make no changes between now and then. 

 

That’s down from 33 percent last year, because employers continued to make changes to slow cost growth. 

 

However, due to the way the excise-tax threshold is indexed, the percentage of employers at risk will rise every year that medical inflation exceeds the general consumer-price index.

 

By 2022, 45 percent of employers are estimated to be liable for the tax unless they make changes, Mercer said.

 

Consumer-directed plans

High-deductible consumer-directed health plans (CDHPs) remain a key tactic for minimizing excise-tax exposure. 

 

Some employers are shopping based on the premium cost, says Flynn.

 

“Those can be … 20-plus percent cheaper than their counterpart co-pay-based plans, the plans where you pay $25 or $30 to go the doctor,” he adds.

 

Other larger companies that are possibly self-insured know the plan doesn’t cost as much because the employee is taking on some of the first-dollar cost, says Flynn.

 

“They are cheaper because employees … use the money a little bit more like it’s their [own] money,” he says.

 

Fully one-fourth of all covered employees are now enrolled in CDHPs, which include an employee account — either a health savings account (HSA), the most 

common type, or a health reimbursement account. 

 

The largest employers have moved most swiftly to add CDHPs — 73 percent of employers with 20,000 or more employees now offer a CDHP, and 30 percent of their covered employees are enrolled.

 

The survey found 64 percent of upstate respondents offered a high-deductible, CDHP with an account feature (an HSA or HRA) in 2015. 

 

Asked to think ahead three years, 74 percent of respondents expect their organization will offer a CDHP in 2018.

 

Other 2015 upstate findings

The survey also found 56 percent of all employees covered in respondents’ health plans are enrolled in PPO/POS plans, 13 percent in HMOs, and 31 percent in CDHPs.

 

PPO is short for preferred-provider organization, while POS is short for point of service.

 

The average employee-contribution amount for employee-only coverage is $127 monthly for a PPO/POS plan; $123 monthly for an HMO; and $81 monthly for an HSA-eligible CDHP. 

 

Mercer also asked employers how likely they are to terminate their medical plans within the next five years and send employees to the public health exchange to seek coverage. Only 5 percent of upstate New York respondents say they are likely or very likely to do so.

 

Methodology

The Mercer “National Survey of Employer-Sponsored Health Plans” is conducted using a national probability sample of public and private employers with at least 10 

employees; 2,486 employers completed the survey in 2015. 

 

Researchers conducted the survey during the late summer, when most employers have a “good fix” on their costs for the current year, the firm said.

 

Results represent about 600,000 employers and nearly 100 million full- and part-time employees. The error range is plus or minus 3 percent.