Survey: health-care costs to edge up nationally rise more sharply in upstate New York

Early responses from a  “major” Mercer survey indicate employers are predicting that their health-benefit cost per employee will rise 3.9 percent on average in 2015. 

Cost growth slowed to 2.1 percent in 2013, a 15-year low, but appears to be edging back up. 

That’s according to a news release that Mercer, a health-care consultant, released on Sept. 11.  Mercer is a wholly owned subsidiary of New York City–based 

Marsh & McLennan Companies (NYSE: MMC).

But those findings are “pretty different” compared to what Mercer is seeing among its upstate New York clients, says Thomas Flynn, Mercer’s health and benefits leader for Upstate.

He spoke with the Business Journal News Network on Oct. 8.

“Locally we’ve been seeing increases that have been several percentage points higher than that,” says Flynn.

He points to Excellus BlueCross BlueShield’s 12.2 percent rate increase for its book of business for employers with fewer than 100 employees. 

Excellus had requested a 16.4 percent increase, but the New York State Department of Financial Services reduced it to 12.2 percent.

The department in early September also cut New York insurers’ overall, average rate-increase of nearly 14 percent for small-group plans down to 6.7 percent. That figure is higher than the finding in the Mercer national survey.

Nationally, the projected increase for 2015 reflects actions employers will take to manage costs, according to Mercer. 

If they made no changes to their plans for 2015, employers’ costs would rise, on average, 5.9 percent. However, only 32 percent of respondents are simply renewing their existing plans without making changes.

Those results are based on responses from more than 1,700 employers on Mercer’s National Survey of Employer-Sponsored Health Plans collected through Sept. 1. The survey remains in the field, the company said.

“The average projected increase for 2015 may still be relatively low, but it does not come easily,” said Tracy Watts, senior partner and Mercer’s national health-reform leader. “Employers have to work hard each year to keep cost increases manageable. And health reform is certainly creating new challenges.”

Enrollment growth
Under the national health-reform law, 22 percent of employer health-plan sponsors are likely to see enrollment grow next year when they are required to open their plans to all employees working 30 or more hours per week.

Mercer called the 22 percent figure “a significant number.” 

Mercer notes 63 percent were in compliance before reform was enacted, and 15 percent made the “necessary” changes last year for 2014.  

Among large retail and hospitality businesses, which typically employ many part-time workers, 39 percent will need to extend coverage in 2015.

“…the first year that … they’ll be measuring toward that penalty for the employer shared-responsibility program,” says Flynn.

The Affordable Care Act has a provision for 2015 requiring firms to offer coverage to 70 percent of their full-time workforce, he adds. If not, they face a penalty of $2,000 per full-time employee. 

“And that’s indexed at 4 percent, so it actually will be $2,080 per employee next year,” says Flynn.

Analysts and observers have speculated that employers would reduce staff or cut hours to limit the number of employees becoming eligible in 2015. However, the early results indicate few of the surveyed employers believe they will take either of those routes. 

At the same time, many companies say they will manage schedules more carefully to avoid workers’ occasionally working 30 or more hours in a week  or to make it clear to new hires that they will work fewer than 30 hours (31 percent).

The survey found 53 percent of those employers must extend coverage to more employees in 2015.

It’s “hard to predict” how many newly eligible employees will choose to enroll in health plans when given the chance, Mercer contends. 

Those newly eligible are “generally lower-paid, variable-hour workers,” Mercer said.

The tax penalty for individuals who do not obtain coverage will rise in 2015, to a minimum penalty of $325 per individual. 

When this penalty first went into effect in 2014, the minimum amount was only $95, and few employers dealt with “significant” growth in enrollment, according to Mercer.

CDHPs
One strategy employers are using to soften the increase in health spending in 2015 is adding a low-cost, high-deductible health plan for the newly eligible employees, or for all employees.  

Consumer-directed health plans (CDHPs) that are eligible for a health-savings account cost, on average, 20 percent less than traditional health plans. 

Health reform is “clearly accelerating that trend,” according to Mercer. 

For the last five years, Flynn says the increase in the number of Mercer clients that have implemented, or examined implementing, CDHPs for the first time has been “dramatic.”  

“I’d be counting it on one hand the number of clients that over the last year did not look at one,” he adds.

While about half of large employers offer a CDHP today, nearly three-fourths (73 percent) say they will have a CDHP in place within three years.  

And 20 percent say it will be the only choice available to employees.

As of now, only 6 percent of large employers have moved to “full-replacement” CDHPs, Mercer said.