Survey: Health Coverage from Your Employer is Likely to Cost More in 2009

If you get health insurance through your employer, chances are very good that you will be paying more for it in 2009, a survey of employers shows.

According to preliminary research results released last week by the consulting, outsourcing and financial services firm Mercer LLC, 59 percent of employers taking action to reduce their 2009 cost increase will raise deductibles, co-payments, co-insurance or employee out-of-pocket spending limits.

That continues a trend that has been consistent for several years. According to Mercer, the median family deductible for in-network services in a PPO – the type of health plan offered by the most employers – rose to $1,500 in 2007, up from $1,000 in 2003. At least partly because of the increase in cost-sharing in recent years, annual health benefit cost increases slowed to about 6 percent in 2005 – down from double-digit rates for the three years prior to that – and have stayed there ever since.

The survey’s findings indicate that cost growth is likely to slow a little further in 2009, to 5.7 percent – which would be the lowest increase in more than 10 years. Last year, Mercer’s annual survey found that average health benefit cost per employee rose 6.1 percent in 2007.

Cost-sharing is not the only strategy being used to control costs. According to Mercer, 19 percent of employers say they will lower their 2009 costs by adding a consumer-directed health plan, which is a high-deductible plan with employee-controlled spending.

Many of the consumer-directed plans give employees an incentive to take cost into consideration when seeking health care services by allowing them to save (on a tax-advantaged basis) account dollars they don’t spend in a given year for future needs. Among the survey respondents that currently offer a consumer-directed plan, the predicted 2009 cost increase averaged 4.5 percent, compared to 6.4 percent for respondents not offering one.

Last year, 12 percent of all employers – and 20 percent of those with 500 or more employees – said they were “very likely” to implement a consumer-directed health plan by 2009.

Mercer’s complete survey results won’t be released until later in the year, but for the 1,317 employer health plan sponsors that have responded so far, the total cost to renew their current health plans – if they were to make no changes – would grow by nearly 8 percent on average. Small employers (those with 10–499 employees) would see an even higher increase, of about 10 percent. However, the majority of respondents say they will take action to lower their actual cost increases.

Ultimately, around 3,000 employers will participate in the survey, Mercer said.

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