In a study issued last week, Mercer Health and Benefits found that total health benefit cost rose by 6.1% in 2006, the same pace as last year, to an average of $7,523 per employee. Employers with fewer than 500 employees saw costs rise by 7.0% in 2006, however, which was a faster rate than last year’s 4.9%. Employers predict another 6.1% increase in average cost for 2007. With employee cost-shifting off the table for many employers, reducing this rate further, or even maintaining it, will require other cost management strategies, Mercer says.
So, the multi-million-dollar question for employers is: If cost growth in health benefits has stopped slowing, will it now start to accelerate?" said Blaine Bos, a worldwide partner at Mercer Health & Benefits and one of the study´s authors. "With less cost-shifting to employees going on, we´ll see how well the leading-edge strategies for longer-term cost management-care management and consumerism-are working."
Rising rates for fully insured plans, which are most commonly offered by small employers, also provided upward pressure on cost in 2006. However, employers applied downward pressure in other areas. Prescription drug benefit cost increases for large employers continued to slow, from 11.5% in 2005 to 10.4% in 2006, as employers added multiple payment levels to encourage employees to buy generic orpreferred brand-name drugs.
Asked to rate the importance of six cost management strategies to their organization over the next five years, care management and consumerism were each rated important or very important by 43% of all employers (and about two-thirds of those with 500 or more employees). Only 31% of all employers (37% of large employers) believe shifting cost to employees or scaling back benefits will play an important role in controlling cost in the near future.
The takeaway: The “consumer directed” plans are simply that: a means of shifting cost responsibility away from the employer, and does nothing to address the rates of inflation in healthcare costs. Nevertheless, HSAs can be useful and are a great way to save on a tax deferred basis, on top of your plans already in place. So, look at them, for the physicians and other highly compensated employees, Just be wary of the sales job being launched at you, and get advice from your accountant and financial planner on this.