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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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December 27, 2007 12:01 AM ET
Cost increases for U.S. group health-care plans continue to hold steady as more employers take steps to keep spending under control. Group health plan costs increased 6.1% this year to an average of $7,983 per employee, up from $7,523 last year, according to a survey of nearly 3,000 employers released last month by Mercer. That marks the third consecutive year that health-care plan costs have increased 6.1%. While that is roughly double the rise in the Consumer Price Index, it is a big improvement from just a few years ago, when annual health plan increases were rising by double digits and employers despaired about their seeming inability to bring costs under control. In 2002, for example, costs jumped an average of 14.7%; in 2003, costs climbed an average 10.1%. “The good news is that cost increases are flat and are not going in the wrong direction,” said Blaine Bos, a survey author and a partner in Mercer’s Minneapolis office. And the easing of health-care inflation is likely to continue. In 2008, survey respondents expect costs to increase an average of 5.8% after taking into account changes they will make, among other factors, in plan designs. One factor checking cost increases is greater use of health management programs, such as wellness programs that give employees incentives to improve their health and disease management programs that aim to reduce costs for employees with chronic conditions. Indeed, 80% of employers with at least 500 employees have put health management programs in place, with just under two-thirds saying their programs have helped to control costs, according to Mercer. But some employers are going beyond health management programs to offer consumer-driven health-care plans, which expose employees to big health-care costs through high deductibles. The plans, though, do more than raise deductibles. The plans are linked to accounts—either health savings accounts or health reimbursement arrangements—that employees can tap to pay uncovered health-care expenses, including deductibles. In both accounts, unused amounts roll over to pay expenses in succeeding years, and employees can keep HSA balances, even after they leave a company, and apply them to future medical expenses, including during retirement. CDHPs are strikingly less expensive than other health-care plan designs, according to the Mercer survey. In 2007, HSA-based plans cost an average $5,679 per employee while HRA-based plans cost an average of $6,224. By contrast, preferred provider organization plans cost an average $7,352 per employee, making them $1,673 more expensive compared with HSA-based plans and $1,128 more expensive than HRA-based plans. It’s not only the high deductible in CDHPs that encourages employees to use services more carefully, according to the survey. The per-employee cost of PPOs with deductibles of at least $1,000 averaged $6,644, $965 less than an HSA-based plan and $420 less than an HRA-based plan. That cost difference “lends support to the theory that the account feature encourages more careful employee spending,” according to the survey. Those cost differences have gotten employers’ attention, especially the nation’s largest companies. This year, 29% of respondents with at least 20,000 employees offered an HSA, up from 22% last year; 31% of the largest employers say it is likely they will offer an HSA-based CDHP next year. Employee enrollment in CDHPs, while still low, also is growing. In 2005, just 1% of employees were enrolled in CDHPs, 3% were enrolled in 2006 and the percentage climbed to 5% in 2007. If enrollment in CDHPs continues to climb, that could positively affect health plan costs. “As employees shift from more expensive plans into less expensive plans, employers’ overall cost per employee drops. This is what we saw happen in a big way when employees moved out of traditional indemnity plans and into managed care plans in the mid-1990s,” Mr. Bos said. Still, even if increases are remaining steady, the cost of providing coverage is more than a growing number of smaller employers can afford. Last year, 61% of employers with fewer than 200 employees offered health-care coverage, down from 66% in 2003 and 69% in 2001. “Even a 6% increase, year after year, makes providing health-care coverage unaffordable” for smaller employers, Mr. Bos said. Requiring employers to offer a health-care plan or pay a fee—one way to reduce the number of uninsured—is not an idea broadly embraced by employers. Fifty percent of respondents said they disapproved of the so-called “play or pay” approach to expanding coverage. Other approaches to expanding coverage were less controversial. For example, the survey found that 48% of employers approved of legislation requiring plans to lengthen the time that dependent children can be covered by a parent’s health insurance. Additionally, 61% of respondents approved of proposals that would require health plans to allow all employees—including those not eligible for coverage—to make pretax contributions to the plans.—Business Insurance
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