Nebraska and Iowa employers in a survey said they expect group health benefit costs to increase more in 2014 than in 2013 and at a rate more than the national average.
The Nebraska employers expect a 7.2 percent average increase, and the Iowa employers expect a 6.8 percent increase. That's after raising deductibles and making other health plan changes to shift costs to employees or control spending.
Nationally, employers project an average 5.2 percent increase in benefit costs — more than twice as much as the 2.1 percent increase in 2013, according to a survey of 2,842 employers by Mercer Health & Benefits of Kansas City, Mo.
Part of the expected 2014 increase is from the Affordable Care Act, the employers said, although one-third of the large employers in the survey said they couldn't estimate the law's impact.
Employers in the national group plan to increase deductibles an average of 15 percent. Without making such changes, the employers said their costs would go up 8 percent nationally, 9.3 percent in Nebraska and 9.5 percent in Iowa.
Despite the expected bigger percentage increases, costs for the Nebraska employers in 2013 were 8 percent below the national average of $10,779 per employee, said Mark Whiting, principal with Mercer Health & Benefits of Kansas City, Mo.
Iowa's average costs were slightly higher than the national average.
The increases expected for 2014 would be on top of 2013 increases of 4.8 percent in Nebraska and 5.2 percent in Iowa.
Whiting said Nebraska will catch up to the national average if its percentage increases continue to outpace the U.S. trends. Even so, he said, employers remain committed to offering health benefits.
“Despite the cloud hovering over health care, it's clear that changes are coming and costs are climbing and employers are taking steps” to continue offering health coverage, he said.
Only 6 percent of employers with 500 or more employees said it's likely they will drop coverage within the next five years. But 31 percent of employers with fewer than 500 employees said it's likely.
Some employers are moving spouses off plans or charging extra if they qualify for coverage elsewhere, for example, or moving to consumer-directed plans that shift more responsibility for medical costs to employees, Whiting said.
The 2013 increase was the smallest since 1997, a period when the Clinton administration was pushing for health care reform, according to Mercer's survey records. The biggest recent increase was 14.7 percent in 2002.
Costs in 2013 rose the least for small employers, 1 percent, and the most for employers with 5,000 or more employees, 3.7 percent.
Many employers expect to cover more employees because of the Affordable Care Act's requirement that individuals buy coverage or pay a tax penalty, said Julio A. Portalatin, president and CEO of Mercer. “But the impact of the ACA on enrollment levels remains a huge question mark.”
Whiting said there's no indication of an impact by parts of the Affordable Care Act aimed at reducing medical costs. “Nobody feels it,” he said. “If they are, it's a minimal amount and gets lost in the pricing” of medical spending and changes in health plans that shift costs to employees.
Nebraska employers were aggressive in changing their health plans to offset cost increases, Mercer said. Median deductibles — with the same number of deductible plans higher and lower — went from $600 in 2013 to $1,000 for next year in Nebraska, while staying at $750 in Iowa. The national deductible average is $1,663.
About three out of four of the Nebraska and Iowa employees have coverage from preferred provider organizations, rather than consumer-directed health plans such as health savings accounts, the report said, similar to the national share. Almost half of the employers offer the consumer-directed plans.
Some Iowans are covered through health maintenance organizations, the survey showed, but almost no Nebraskans.
White said per-person costs for the Nebraska employers may be lower because of a combination of factors, including a below-average cost of living, higher deductibles and healthier people.
Employers reported that consumer-directed plans cost an average of 17 percent less than preferred provider plans, but as deductibles for preferred provider coverage increase, there's less potential cost savings, Whiting said.
Mercer surveyed 2,842 employers with at least 10 employees in late summer. Results have a margin of error of plus or minus 3 percentage points.
Group health benefits expected to rise
Results from a survey of 24 employers in Nebraska and 45 in Iowa by Mercer Health & Benefits of Kansas City, Mo.
|2013 average cost increase||4.80%||5.20%|
|2013 average benefit cost||$9,902||$10,831|
|Median PPO deductible||$1,000||$750|
|Expected 2014 increase before plan changes||9.30%||9.50%|
|Expected 2014 increase after plan changes||7.20%||6.80%|
|Employers offering CDHP||46%||47%|
|Pct. enrolled in PPO/CDHP||78%/22%||73%/20%|
|Average monthly payment for employee-only PPO||$121||$101|
|Likely to drop plans within 5 years||4%||10%|
PPO: Preferred provider organization. CDHP: Consumer-directed health plan.