Large employers brace for higher health care costs

The nation's largest employers expect health care costs to jump 8.9 percent in 2011. This year, costs increased an estimated 7 percent on average.

According to a survey from the National Business Group on Health, employers are using a number of strategies to mitigate these rising costs.

Tactics most often reported as the most effective in controlling costs were offering a consumer-directed health plan (21 percent), followed by wellness initiatives (20 percent), and increased employee cost-sharing (17 percent).

Specific strategies that were most often reported as one of the three most effective were wellness initiatives (56 percent), disease/condition management (47 percent) and pharmacy benefit design changes (39 percent).

Cost-sharing strategies

Employers are increasing cost sharing in a number of areas. The most prevalent strategy is increasing the employee percentage contribution to the premium with 63 percent of employers in 2011 using this strategy, compared to 57 percent in 2010. Additionally, 46 percent of employers plan to raise out-of-pocket maximums in 2011 compared to only 36 percent in 2010 and 32 percent in 2009.

% of Employers Increasing Cost-Sharing For: 2011 2010 2009
Employee percentage contribution to the premium cost 63% 57% 62%
Out-of-pocket maximums 46% 36% 32%
In-network deductibles 44% 45% 38%
Out-of-network deductibles 40% 47% 35%
Co-pay/co-insurance for specialist care 21% 13% 15%
Co-pay/co-insurance for primary care 6% 11% 15%

Offsetting pharmacy costs

Employers are planning to raise the co-pay/co-insurance for retail pharmacy (25 percent) and mail-order pharmacy (21 percent) to help manage the rising costs of pharmaceuticals.

% Employers Increasing Cost-Sharing For: 2011 2010
Co-pay/co-insurance for retail pharmacy 25% 30%
Co-pay/co-insurance for mail-order pharmacy 21% 17%

Retiree health

The most prevalent type of retiree offering in 2011 was the 28 percent drug subsidy (66 percent). Roughly a third of employers (34 percent) offer a Medicare Advantage plan, and 25 percent offer a Medicare Part D plan. A smaller percentage of employers also offer subsidies for retirees to enroll in a Medicare Advantage plan (9 percent) or Medicare Part D plan (9 percent)

To stem costs for retiree health, many employers have placed caps on company contributions (46 percent) and increased employee contributions (37 percent). Strategies that focus on limiting the role of employers in retiree health benefits in the future are also prevalent with 33 percent of employers eliminating coverage for future retirees and 24 percent moving to access only.

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