OPINION: Good, bad news on health costs

Business Insurance reports:

“THERE IS GOOD NEWS and there is bad news in the latest Mercer L.L.C. analysis of group health care plan costs. The bad news: Even in a down economy, group health care costs continue to rise, climbing by an average of 6.1% in 2011. For the first time, costs per employee surpassed $10,000.

The good news: Cost increases eased from 2010, when costs per employee rose by an average 6.9%. That slight moderation came as many employers had to expand coverage, such as eliminating lifetime dollar limits, to comply with requirements of the federal health care reform law that took effect this year.

More importantly, far more employers have embraced consumer-driven health plans, which we think have much more potential to keep costs under control than other plan designs. CDHPs are becoming a mainstream design, with nearly one-third of large employers now offering CDHPs.

Also, nearly nine out of 10 large employers say they will add or strengthen programs to encourage employees to engage in more health-conscious behavior, therefore lowering health care costs.

Another positive survey finding is that employers are not ready to throw in the towel and fold their health plans, even when the bulk of the health care reform law goes into effect in 2014.

While nearly one in five small employers say it is likely that they will terminate their plans, the situation is very different among larger organizations.

For example, just 4% of employers with at least 5,000 employees say it is likely they will terminate their plans in 2014.

Mercer executives attribute big employers’ willingness to continue their health care plans to economics. Employers believe that after paying penalties imposed by the law for not offering health care plans and grossing up employees’ salaries so they can purchase comparable coverage in insurance exchanges that will be established, they won’t reap any financial savings.

We think another reason is that many employers still believe they can do a better job of controlling costs than exchange programs, which ultimately will be funded, at least in part, by the taxes they will pay.”