Towers Watson Projects Employer Health Care Costs Will Increase 5.3% In 2013; Employers Remain Committed To Health Care Plan Sponsorship
Following the U.S. Supreme Court decision on health care reform, most employers (88%) have affirmed their commitment to offer health care benefits to their active employees for the foreseeable future, according to a survey of 440 midsize to large companies by Towers Watson (NYSE, NASDAQ: TW), a global professional services company. This strong commitment (up 17 percentage points from 2011) comes despite a projected 2013 per employee health care cost of $11,507, an increase of 5.3% from 2012. It also comes amid uncertainty relating to the November elections, development of insurance exchanges and the rapidly evolving health care delivery system.
“While the most significant changes mandated by health care reform will not occur until 2014, it is essential that companies develop a strategic response and prepare for these changes well in advance of then,” said Ron Fontanetta, senior health care consulting leader at Towers Watson. “These changes will have a profound impact on the way health care is delivered and how many individuals acquire health insurance, most notably retirees.”
Roughly two-thirds of companies say the Supreme Court’s decision has affected their overall health strategy. However, one-third are waiting for the upcoming elections or the opening of insurance exchanges before making any significant changes to their health care strategy. In fact, nearly three-quarters (72%) state they lack confidence that the exchanges will provide a viable alternative for active employees by 2015. While relatively few companies are likely to direct active employees to exchanges in the near term, the story for retirees is very different. Nearly six out of 10 of companies with a program are somewhat to very likely to discontinue retiree medical plan sponsorship for post-65 retirees, with 64% considering the same for pre-65 retirees.
Although the rate of health care cost increases has slowed (5.3% projected for 2013 compared with an expected 5.9% this year), a majority of employers (58%) expect they will trigger the health care reform excise tax* in 2018 if they do not make changes to their current benefit strategy. As a result, 83% of employers are planning to take steps to control their costs to avoid the tax. The $11,507 total cost represents an employer cost of $8,911 per employee and an employee cost of $2,596 per employee. While the overall increase in employee cost sharing is modest, it is meaningful to employees, as it outpaces average merit increases.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV