Employer health care costs increase at slower rate

Michelle Swafford

Monday, Nov. 22, 2004 | 10:38 a.m.

A study released today estimates that health plan costs for employers this year increased at the lowest rate in five years.

Mercer Human Resource Consulting reported that the average cost rose 7.5 percent to $6,679 per employee, which includes employers' and employees' premium contributions for health and dental. Last year's health plan increase averaged 10.1 percent per employee.

In the Southwest region, which includes Nevada, the survey found that the average health benefit costs rose 6.9 percent to $7,309 per employee among employers with more than 500 employees. Regional data for small employers were not available.

Nationally, costs rose more slowly for employees with 10 to 499 employees, the average employee cost increased 5.5 percent to $6,359, Mercer said. In comparison, employers with more than 500 employees experienced an average cost increase of 9 percent to $6,918 per employee.

Mercer surveyed 3,020 public and private employers with at least 10 employees last summer about their health benefits. The margin of error on the survey was plus or minus 3 percentage points.

Two factors are said to have contributed to the slower increase among smaller employers. First, insurers lowering their premiums, which aided smaller employers because they tend to be fully insured, Mercer said. Secondly, "aggressive cost-shifting over the past few years has slowed utilization."

"When you start the year with a $1,000 deductibles and do not see any major expenses ahead, you think twice about going to the doctor if you have a cold,"

Gail Paul, a Phoenix-based Mercer consultant, said in a statement, "The downside, of course, is that you may also put off getting necessary care. And that is not good for anyone."

Las Vegas insurers and insurance brokers say 2004 premiums increased between 6 percent and 47 percent depending on the plan and carrier.

"Few employers have decreased their contribution, but most have made plan changes with co-pays, deductibles and increasing the maximum out-of-pocket employees will have to pay," Bob Bishop, an insurance broker with KIA Insurance, said.

Don Giancursio, vice president of sales for Sierra Health Services Inc., said employers' premiums increased between 6 percent and 9 percent during 2004.

Cheryl Randolph, spokeswoman for PacifiCare Health Systems Inc., said PacifiCare's premiums increased between 11 percent and 12 percent in 2004.

Mercer said consumer-directed health plans, which include a high-deductible insurance plan with a health savings account that allows employees to save tax-free money for medical expenses, are likely to become more popular among employers in 2005 and beyond because they save the employer money. Only 1 percent of all employers offered the plans in 2004, but 14 percent of the large-employer survey respondents said they would offer one in 2005 and 26 percent said they would in 2006.

Another way that employers curbed costs in 2004 was by implementing disease management programs for diabetes and heart disease or hypertension, Mercer said. The study said that about half of the large employers surveyed, said they offered management programs.

In 2005, national employers estimate a 10 percent increase in health plan costs if they did not change any of the current benefits they offered. But, the majority of employers said they would alter their health benefits, change carriers or increase their employees' contributions, which would equate to about a 6.6 percent increase in costs.

Southwest employers expect to pay in 2005 an increase of 5.8 percent for health benefits after plan changes.