Oct 14

Written by: Besselman and Little
10/14/2011 9:21 AM 

2012 Health Benefit Cost Growth Likely to be the Lowest in 15 Years

Amidst all the talk of health benefit costs skyrocketing, there may be good news -on the horizon.  Early responses to a Mercer survey still in the field suggest that the average growth in health benefit costs will slow to 5.4% in 2012, the smallest increase since 1997.  Still, cost growth remains well above both general inflation and growth in workers' earnings.

While this increase reflects cost-cutting changes employers will make to their current health benefit programs, such as raising deductibles or moving employees into lower-cost health plans, the preliminary survey findings released yesterday suggest that the underlying trend has slowed as well.  Asked how much costs would rise if they made no changes to their current plans, employers reported an average increase of 7.1%.  Over the past five years, this underlying health benefit cost trend has been running at about 9%.

The slower trend is good news for workers because an employer's first line of defense against a high initial renewal rate typically is to change plan provisions so that employees pay more out of pocket for health care.  If the underlying trend is lower to begin with, employers are likely to shift less cost.

Some analysts believe the tough economy, combined with generally higher deductibles and other forms of cost-sharing, is affecting health care utilization - that because employees have less disposable income and are working longer hours, they are less likely to seek non-urgent care.  On the other hand, Susan Connolly, a partner at Mercer, says that slowing utilization may also be a sign that programs targeted at improving employee health - now the rule rather than the exception in employee benefit plans - are having a positive impact.