Healthcare Costs Starting to Slow Down

The increase annually in healthcare costs appears to be slowing.  According to Sandra Block of Gannett News Service, “If there’s any good news to be found, it’s that the increase in overall costs of providing healthcare to employees has slowed.  Tower projects an increase of 5.9 percent in 2012, which represents a significant change from 7.6 percent in 2011.  Mercer, another human resources consulting firm, predicts that employee healthcare costs will rise 5.4 percent in 2012.  That’s small consolation, though, to employees whose income hasn’t kept pace with the rise in healthcare costs.  In August, personal income fell 0.1 percent from July, driven by a decline in wages and salaries, according to the Bureau of Economic Analysis.”

There’s bad news for Americans whose healthcare insurance is provided by their employer.  According to Towers Watson, a human resources consultant, employers will pass on cost increases primarily through higher employee premium contributions.  Towers Watson says that 66 percent of firms will increase employees’ share of premiums for single-only coverage in 2012; 73 percent will increase the share of premiums for dependent coverage.  A survey by the National Business Group on Health (NBGH) found that 53 percent of employers intend to increase employees’ share of premiums, while 39 percent plan to increase in-network deductibles.

The yearly survey by NBGH, a not-for-profit alliance of 83 of nation’s largest companies — employing more than million workers — expect healthcare costs to continue rising significantly faster than inflation because of medical inflation and the Patient Protection and Affordable Care Act.  “This is an unsustainable model for our country,” said Helen, Darling, the NBHG’s president and CEO, referring to the financial strains caused by the ongoing increases.  Some believe that the rising healthcare costs stemmed from components of the 2010 federal healthcare law, including its mandate to cover the offspring of workers up to age 26 and its coming bans on caps for annual benefit limits.  Employers said a variety of cost-saving moves to counter the rising cost of their health coverage, including encouraging employees to use centers of excellence for transplants and other procedures.  “Even if they spend more on the initial admission, they spend less overall due to less need for readmission or re-treatments,” Darling said, in reference to incentivizing employees to seek treatment at highly rated hospitals.

At the time of year when open enrollment begins, employers want their employees to be healthier as a means of controlling costs.

Employers also will encourage their employees to choose high-deductible plans — with lower premiums – and persuade workers to be savvy healthcare shoppers.  Some employers will require significantly higher premiums for employees who do not agree to monitor their own health and address problems.  At a time when both employers and workers are weary of paying more for health coverage, experts say it’s important this year to closely study new wellness programs — as well as all the other options on the table — to take advantage of any savings.  “Healthcare costs are going to continue to grow significantly and for your own health and your own wealth and financial good, you need to get fully engaged in understanding what your choices are,” said Tony Holmes, a partner with Mercer.

Holmes said employers expect to pay 5.4 percent more for health plans in 2012 — about a half percentage point below the typical increase over the past 10 years.  Nearly one-third of employers plan to increase premiums for employees, according to Holmes.  Charges to cover a spouse or children are even more likely to climb; more than 40 percent of large employers plan to increase the costs for dependents.

Some businesses are moving away from co-pays, where employees pay a fixed dollar amount for healthcare services and the plan picks up the rest. Instead, they’re charging workers a percentage of the total costs.  That has the goal of making consumers more aware of the total cost of the healthcare they use.  “We are clearly seeing a march toward a more aggressive consumerist system,” the NBHG’s Darling.

Mercer also found that utilization of healthcare services has slowed in 2011. The difficult economy, higher deductibles and other forms of increased employee cost-sharing, may impact utilization, Mercer said.  “Because employees have less disposable income and are working longer hours, they are less likely to seek non-urgent care.”  Additionally, utilization may be slowing because of employer programs aimed at earlier detection of health problems, Mercer said.  “Earlier risk identification and health education, along with improvements in drug therapies and medical technology, are keeping people with health risks and chronic conditions away from the emergency room,” Susan Connolly, a partner in Mercer’s Boston office, said.  The findings are based on responses from almost 1,600 employers.  In the end, approximately 2,800 employers are expected to respond, with the results — including the actual average healthcare plan cost increase for 2011 — to be released this year.

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