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Employers Held Health Benefit Cost Growth To 4.1% In 2012, The Smallest Increase In 15 Years

Decisive action by employers in 2012 – in particular, moving more employees into low-cost consumer-directed health plans and beefing up health management programs – was rewarded with the lowest average annual cost increase since 1997. According to the National Survey of Employer-Sponsored Health Plans ( www.mercer.com/ushealthplansurvey), conducted annually by Mercer, growth in the average total health benefit cost per employee slowed from 6.1% last year to just 4.1% in 2012. Cost averaged $10,558 per employee in 2012. Large employers – those with 500 or more employees – experienced both a higher increase (5.4%) and higher average cost.

Employers expect another relatively low increase of 5.0% for 2013. However, this increase reflects changes they plan to make to reduce cost; if they made no changes, cost would rise by an average of 7.4%.

Mercer’s nationally projectable annual survey includes public and private organizations with 10 or more employees; 2,809 employers responded in 2012.

“Employers are very aware that in 2014, when the health reform law’s provisions kick in, they will be asked to cover more employees and face added cost pressure,” said Julio A. Portalatin, President and CEO of Mercer. “They’ve taken steps to soften the impact and it’s paying off already.” Employers that may have been waiting for the election results will need to act quickly, he says, “because critical decisions need to be made by the summer so they can be implemented for 2014 open enrollment.”

Success in controlling cost growth in recent years may be contributing to employers’ commitment to providing health coverage. Few believe it is likely that they will terminate their employee health plans within the next five years, even though state-based health insurance exchanges will provide another source of health coverage for individuals beginning in 2014. Just 7% of large employers and 22% of small employers (those with 10-499 employees) believe it is likely or very likely that they will terminate their health plans for employees.

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