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Monday, 06 August 2012 16:28

Survey Shows How Employers Are Dealing With Rising Health Care Costs

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Employers expect health care costs to rise an average of 7 percent next year, forcing organizations to employ a variety of cost- control measures that largely focus on asking workers to pay more, according to a new survey by the National Business Group on Health.

The new survey – which is being touted as the industry’s first look at costs and plan design changes for 2013 – also found that employers are continuing to make adjustments to their benefit plans to comply with additional provisions of the U.S. health reform law.

According to the survey:

  • Six in ten employers (60 percent) plan to increase the percentage of the premium paid by employees in 2013, although the majority of those employers indicated that the increase would be by a small amount (less than 5 percent);
  • Additionally, 40 percent of organizations plan to increase in-network deductibles, while 33 percent will increase out-of-network deductibles and another 32 percent will hike out-of pocket maximums.

Cost increases “simply not sustainable”

The survey by the NBGH, a non-profit association of 342 large employers, is based on responses from 82 of the nation’s largest corporations and was conducted in June 2012 prior to the Supreme Court’s announcement to uphold the health care reform law.

“Rising health care costs continue to plague employers at an alarming rate,” said Helen Darling, President and CEO of the National Business Group on Health, in a press release about the latest survey. “Although cost increases have stabilized somewhat, they are still on a higher base from last year and are simply not sustainable, especially when our nation’s economy and workers’ wages are virtually flat and everybody is struggling.”

The survey also found that while many employers continue to adopt cost-sharing provisions, those organizations that responded to the survey now consider consumer-directed health plans (CDHP) and wellness initiatives “to be more effective at stemming cost than shifting costs to employees.”

According to the survey, 43 percent cited a CDHP as the most effective cost control tactic, followed by wellness programs (19 percent). Less than one in ten (9 percent) respondents indicated that increased employee cost-sharing was the most effective tactic — a big change from last year, when cost shifting was cited as THE most effective cost-control measure.

Beyond cost control of health care in 2013, the part of this survey I found most interesting centered around employee wellness.

How employers are approaching wellness

Wellness has been a particularly difficult issue to figure out because no clear consensus seems to have emerged around what the “best practices” are when it comes to encouraging employee’s to do more to stay healthy.

The survey found that employers are continuing to experiment with the best ways to incorporate financial incentives into wellness programs in their efforts to engage employees in healthy behaviors and lifestyles. They include:

  • About half of respondents (48 percent) use incentives to encourage participation in wellness programs, with some employers are basing incentives on specific health outcomes.
  • More than four in ten (44 percent) provide an incentive for not using tobacco, while 29 percent base awards upon achievement of outcomes such as BMI or cholesterol levels.
  • Just under one fourth of respondents (22 percent) have chosen a more punitive approach – applying surcharges to employees for not participating in certain programs.

The survey also reported that employers plan to sharply increase the incentive amount for maintaining a healthy lifestyle or participating in a wellness program. Among employers that offer incentives, the median amount employees can earn will jump 50 percent from $300 this year to $450 in 2013. The median incentive amount that dependents can earn is expected to increase from $250 this year to $375 next year.

Affordable health care a “top priority”

“Despite keeping cost increases steady for next year, providing high quality, affordable health care remains a top priority for employers. HR leaders need to keep the pressure on to control health care cost increases, increase consumerism and individual accountability, use all of the tools and resources available to empower consumers to be wiser purchasers and support them to choose healthier lifestyles. At the same time they must continue to stay on top of the ever changing regulatory environment, and adapt the design of their health plans as necessary,” said Darling.

The National Business Group on Health represents a lot of bug businesses, so you should probably sit up and listen when they have something to say. You’ll probably also see many more surveys like this one in the next few months, especially since health care costs continue to rise and are a huge issue for lots of businesses.

How will health care reform change that? It’s hard to say, of course, but as this survey shows, American employers are staying busy focusing on both the health challenges and cost increases of the present and near future as well as the big changes they have coming down the road.

John Hollon is Vice President for Editorial of TLNT.com, and the former Editor of Workforce Management magazine and workforce.com. An award-winning journalist, he has written extensively about HR, talent management, and smart business and people practices. Contact him at This email address is being protected from spambots. You need JavaScript enabled to view it., and follow him on Twitter at http://twitter.com/johnhollon

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