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Survey Shows Employers Expect Higher Health Care Costs in 2011

Posted on 21 Jul 10

In light of the U.S. health care reform law passed earlier this year, many companies expect higher health care costs resulting from mandates that take effect with the 2011 plan year, according to a survey of nearly 800 employers released by Mercer last month.

"Average health benefit cost per employee has been rising consistently at about 6% for the past five years," said Tracy Watts, a consultant at Marsh sister company, Mercer. "That seems to be employers' threshold of pain. If compliance with health insurance reform pushes the cost increase up toward double digits, employers will be exploring ways to bring it back within their comfort zone."

The survey also polled employers about their level of concern over six major provisions of the Patient Protection and Affordable Care Act (PPACA). The excise tax on high-cost plans emerged as their top concern, even though it is the last provision to be implemented (effective 2018).

Further, the rule that employers must offer "affordable" coverage to all employees working an average of 30 hours or more a week in a month, or else be subjected to penalties, posed a significant concern for 24% of respondents in the retail industry, which relies heavily on part-time labor.

Regarding extension of coverage to dependent children up to age 26 – with new notification requirements, employee communication, and tax implications – employers are considering a number of possible actions that would offset the increased cost that additional dependents would bring.

On the whole, Beth Umland, Mercer’s research director for health and benefits, noted, "While each of these new rules that adds administrative burden has the potential to increase cost, employers have certainly had to cope with compliance challenges in the past."