Business News

Healthcare costs to continue rising for large U.S. employers

WASHINGTON, Aug. 9 — Healthcare costs at large U.S. companies are expected to increase 6 percent for a third consecutive year in 2017, according to a survey conducted by a group focusing on national health policy.

Survey results were disclosed Tuesday at a news conference held by the National Business Group on Health, a non-profit association of 425 members, many of them Fortune 500 companies or large public sector employers.

The single-digit growth, against the prospect of dramatic increases in health insurance premiums, is seen as steady.

Preliminary estimates put increases in Marketplace premium rates under the Affordable Care Act at about 9 percent in general, according to a Kaiser Family Foundation report, updated late last month.

But the 6 percent increase for large employers still outruns some major economic indicators.

“Consistent and stable doesn’t mean good,” said Brian Marcotte, president and CEO of the National Business Group on Health. “Costs are still running at more than twice the rate of inflation and general wage increases, thereby threatening affordability.”

According to Marcotte’s group, the survey, taken between mid-May and mid-June — a time when many firms make crucial decisions on health coverage for the coming year — included responses from 133 employers. The sample was taken from a variety of industries that offer coverage to more than 15 million workers and their dependents.

About 31 percent of the companies surveyed said specialty pharmacy costs were the primary driving force behind the surge of health costs. Only 6 percent expressed that in the 2014 survey.

Many large employers are expecting to limit the increase to 5 percent by making slight changes to coverage designs. But Marcotte said employers’ focus is shifting from plan design to delivery system.

Some 70 percent of employers say they are offering the choice of telehealth services to employees as a supplement to primary care in states where it’s legal. Nine in 10 companies told surveyors they plan to provide such benefits in 2017. By 2020, telehealth coverage is expected to be nearly universal among large employers.

Meanwhile, consumer-directed health plans are gaining popularity. That’s a system that combines lower premiums with higher deductibles, and sometimes with a tax-free health savings account funded by both employer and employee. Consumer-directed plans can also involve a health reimbursement arrangement administered solely by the employer for medical costs.

The intention is to encourage responsible health care purchasing and therefore yield savings for both employers and workers. Over half of survey respondents reported that adoption of consumer-directed plans was one of their most effective methods of containing medical costs.

Meanwhile, businesses are considering how to deal with the excise “Cadillac tax” — a 40 percent marginal tax on exceedingly expensive health insurance that’s set to go into effect in 2020. As the threshold is calculated in terms of general inflation instead of a faster-growing medical inflation, about 53 percent of employers expect that at least one of their health plans will reach the tax threshold at that point.