“The winning streak continues as employers predict another year of low health benefit cost growth in 2016.” – That’s the headline to the announcement from international benefits consultants Mercer Inc. of the preliminary findings from their latest employer survey.
Sounds good, right? Finally, healthcare costs are under control.
Unfortunately, reading the survey results gives another, very different impression.
What the survey actually found was that employers predict that health benefit costs per employee will rise by 4.2 percent on average in 2016—after they make planned changes such as raising deductibles or switching carriers.
The survey announcement enthuses about what it calls the “slow-down in the underlying cost growth”(that is, the increase ifno changes were made to employer plans). Specifically, without plan changes employer costs would have increased by 6.4 percent for 2016, and 7.1 percent in 2015. Mercer notes that the 2016 projection is the lowest rate of underlying cost growth seen since 2005, and that 2016 will be the fifth year of benefit cost growth below 5 percent.
So, is this good news?
Well, no. For three reasons.
First, the underlying cost growth percentages are still significantly greater than projected GDP growth (and presumably employer revenue growth) of around 2.5 percent in 2015 and 2016. In other words, healthcare will continue to eat up more and more of our economy.
Second, if we assume that average company revenues increase at the rate of the economy as a whole, employers will still face healthcare costs that are rising faster than revenues—even after transferring more of the burden to their employees.
Third, thanks to employer efforts to limit their benefit cost increases, employees will face either increased premium shares or increased deductibles—or both. If we assume that most of the difference between the increase in underlying cost growth and employer cost growth (a 2.2 percent difference in 2016) is going to come out of employee pockets, employees will be paying close to $400 a year more for family medical care next year.
So, where’s the “winning streak”?
Roger Collier was formerly CEO of a national health care consulting firm. His experience includes the design and implementation of innovative health care programs for HMOs, health insurers, and state and federal agencies. He is editor of Health Care REFORM UPDATE.
Any cost increases over inflation or GDP growth is too expensive
I read you have experience in implementing innovative health care programs
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