NCPA - National Center for Policy Analysis


December 28, 2007

Cost increases for U.S. group health care plans continue to hold steady as more employers take steps to keep spending under control, according to a survey by Mercer, a consultancy.

According to the survey's authors:

  • One factor checking cost increases is greater use of consumer-driven health care plans (CDHPs), which include either health savings accounts or health reimbursement accounts.
  • CDHPs are strikingly less expensive than other health care plan designs; in 2007, HSA-based plans cost an average $5,679 per employee while HRA-based plans cost an average of $6,224.
  • By contrast, preferred provider organization plans cost an average $7,352 per employee, making them $1,673 more expensive compared with HSA-based plans and $1,128 more expensive than HRA-based plans.

Those cost differences have gotten employers' attention, especially the nation's largest companies:

  • This year, 29 percent of respondents with at least 20,000 employees offered an HSA, up from 22 percent last year.
  • 31 percent of the largest employers say it is likely they will offer an HSA-based CDHP next year.

Employee enrollment in CDHPs, while still low, also is growing:

  • In 2005, just 1 percent of employees were enrolled in CDHPs.
  • 3 percent were enrolled in 2006 and the percentage climbed to 5 percent in 2007.

If enrollment in CDHPs continues to climb, that could positively affect health plan costs. As employees shift from more expensive plans into cheaper plans, employers' overall cost per employee drops.  This is what we saw happen when employees moved out of traditional indemnity plans and into managed care plans in the mid-1990s, says Blaine Bos, a survey author and a partner in Mercer's Minneapolis office.

Source: Jerry Geisel, "Health plan cost hikes stay at 6.1 percent, similar increases expected for 2008," Financial Week, December 27, 2007.

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