Group healthcare plan cost increases next year may slip below double digits for the first time in years.
A survey of 916 employers by Mercer Human Resource Consulting in New York found that employers expect health plan cost increases to increase by 9.6% next year.
That would be the smallest increase since 2000, when employers' costs rose by an average of 8.1%. Last year, costs climbed by an average of 10.1%. Final cost increase figures for 2004 are not yet available, but they are expected to be similar to those in 2003.
Large employers -- those with at least 20,000 employees -- expect health plan cost increases to average 9.5% next year, while small employers -- those with between 10 and 49 employees -- expect costs to increase by an average of 10.4%.
The slowdown in healthcare plan cost increases is the result of several factors, including employers shifting more costs to employees, such as by raising deductibles; adding cost-control programs, such as disease-management plans; and dropping their most expensive health care plans, according to Mercer.
"We're going to see some considerable cost-shifting to employees next year, especially among smaller employers," said Blaine Bos, a consultant in Mercer's Minneapolis office.
If surveyed employers had not made any changes to their plans, the average cost increase for 2005 would be 13%, a level that is unacceptable to most employers, Mercer notes. "Some just aren't going to sit still through it," Mr. Bos said.
Still, while healthcare inflation is easing, cost increases remain very high. "While we may no longer be dealing with a charging tiger, the tiger is not exactly retreating," Mr. Bos said.
Paul Ginsburg, president of the Center for Studying Health System Change, a not-for-profit healthcare research group based in Washington, D.C., is not so sure. Ginsburg notes this is the third year in a row that employers have trimmed benefits by an estimated 3% to control costs, a phenomenon he calls "benefits buydown."
The announcement today that the rise in the ranks of the uninsured -- up from 43.6 million Americans in 2002 to 45 million in 2003 -- was mitigated in all likelihood by employers using this buydown technique, Ginsburg said.
"If they couldn't do that, presumably they would drop coverage," he said.
Somewhere, even this financial dodge will lose its effect and healthcare benefits will no longer be an effective employee recruitment or retention tool, he said.
Either people will say the cost of coverage exceeds the benefit and drop out, or simply conclude that an employer's offerings are so meager they amount to no coverage at all, he said.
The other issue is the tipping point at which cost sharing is so high, people go beyond being price sensitive shoppers who avoid unnecessary healthcare spending and become detrimentally underinsured, deferring or avoiding needed healthcare services because they can't afford them.
"We're there now," Ginsburg said. "It's just hard to recognize."
--Joseph Conn contributed to this story.