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Employee Healthcare Costs See Lowest Rise in 15 years

Early results of a survey indicate that the average cost of employee health coverage will rise 5.4% in 2012, the smallest increase seen in 15 years.
The low increase reflects cost-cutting changes by employers to current health-benefit programs, such as higher deductibles and lower-cost health plans. But the lower percentage also suggests that the underlying trend has slowed.
These preliminary findings are included in the “National Survey of Employer-Sponsored Health Plans 2011,” a review spearheaded by Mercer, a firm that designs, implements and administers health, retirement and other benefit programs.
The slower trend is good news for employees, says Mercer officials, because companies typically change health plans to force workers to pay more out-of-pocket expenses when faced with a high initial renewal rate.
In 2011, the average increase in healthcare cost per employee was 9.8%, before any changes were made to the plan. After changes, the per-person average increase was 6.4%.
For 2012, early findings predict a 7.1% increase per person, before any changes are made. After changes, the projection is 5.4%.
The results are based on 1,600 survey responses submitted by Sept. 8.  Roughly 2,800 employers are expected to participate in the survey.
The expected slower-cost growth for 2012 can’t be attributed to company action alone; it is also affected by other factors.
Programs targeted at improving employee health could be the reason that overall use of healthcare services is slowing, suggests Susan Connolly, a partner in Mercer’s Boston office.
“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 rooms,” she says.
Connolly adds: “And consumers are more aware that overuse and misuse of healthcare services will directly impact their wallets as well as their employer’s budget.”
Despite the slowing of the underlying cost trend, a 7.1% increase is more than many employers are willing to cover. To offset that cost, 33% said they will raise contributions for employee-only coverage, while 36% said they will raise dependent coverage.
Strikingly, 39% of employers said they will not ask employees to pay a greater share of cost.
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