News & Information

 

FEATURED PRODUCT

5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.

Learn More »

CCH® BENEFITS — 12/03/08

High-Deductible Health Plans Were The Norm In 2008, Mercer Survey Finds

From Spencer's Benefits Reports: In 2008, four-fifths of employer-sponsored PPOs require a deductible with a median of $1,000 for individual coverage in high-deductible, non-health savings account (HSA)-eligible PPOs, according to the final results of Mercer’s annual National Survey of Employer-Sponsored Health Plans, released on November 19.

Only half of employers in 2000 required a deductible for their PPOs, Mercer noted. The 2008 median deductible was twice the amount required in 2007, and four times the median deductible in 2000. To qualify for an HSA, the deductible must be at least $1,100 for individual coverage in 2008. PPOs are the most popular health plan structures, with 69% of employees enrolled. The Mercer survey includes responses from nearly 2,900 employers with at least ten employees.

“The introduction of the HSA may have changed employers’ thinking on just how high a deductible can go without causing employees to revolt,” commented Blaine Bos, a Mercer partner and author of the study. “Raising the deductible has become the fallback for employers faced with cost increases that they cannot handle. It is the easiest way to reduce costs without taking more money out of every employee’s paycheck.” Deductibles are lower among larger employers, with employers with at least 500 employees requiring an average of $300 for individual and $800 for family coverage.

For the fourth consecutive year, health care plan sponsors held cost increases to about 6% in 2008, Mercer found. Health care plan sponsors anticipate a similar increase, 6.4%, in 2009, after they have made changes either in benefits levels, type of plan offered, or plan vendors. However, Mercer wondered if the plan sponsors’ cost increase projections made in the fall of 2008 for 2009 will hold in face of the economic downturn as insureds deal with increased stress and related medical conditions.

CDHPs Lower Costs

Consumer-driven health plan (CDHP) offerings with either a health reimbursement arrangement (HRA) or an HSA continued to rise among large employers in 2008, from 14% to 20% of employers with at least 500 employees. Most of the new CDHPs in 2008 were HSA-based, and more than one-fourth (29%) of large HSA plan sponsors made no contribution to the account. Employers’ average contribution to HSAs was $694. CDHPs were most prevalent among the largest employers (those with at least 20,000 employees)—45% offered them, up from 41% in 2007. However, small employers have been less enthusiastic in adopting CDHPs—only 9% of employers with 10 to 499 employees offered a CDHP, up from 7% in 2007. Small employers were more likely to offer a high-deductible PPO without either an HRA or HSA, Mercer noted. Only 7% of all covered employees were enrolled in CDHPs in 2008, up from 5% the prior year.

“Difficult economic times may speed both the adoption of CDHPs by employers and higher enrollment rates where employees have a choice of plans,” Mr. Bos stated. “With so many employers already requiring relatively high deductibles, it’s not a big step for them to put in an HSA with a $1,150 deductible–the minimum amount for 2009–and use the savings to fund the account, improving overall value to employees.”

According to Mercer, CDHPs cost employers significantly less per employee than PPOs or HMOs—an average cost of $6,207, compared to $7,815 for PPOs and $7,768 for HMOs. HSA-based plans cost less than HRA-based plans, $6,027 versus $6,420. CDHPs even cost less than high-deductible PPOs, by more than $400, and the average cost increase for CDHPs in 2008 was 4%, compared to 6.3% for PPOs and 9.1% for HMOs.

Other findings in the Mercer study included the following:

Health management—More employers that offered a health management program offered incentives in 2008 than in 2007 (26%, up from 23%). Nearly one-fifth (17%) of the largest employers and 15% of employers with at least 10,000 employees required a higher premium contribution from smokers than from nonsmokers. Health risk assessments were used by nearly two-thirds of large employers in 2008 (65%, compared with 56% in 2007).

Retiree medical—Only 27% of large employers in 2008 offered health care benefits for early retirement of new employees, down from 46% 15 years earlier. Retiree medical coverage for Medicare-eligible retirees was offered by only 19% of large employers, compared to 40% 15 years earlier. Availability of retiree medical coverage affects employee retirement decisions, as evidenced by the age 61 average retirement age for employees with retiree medical and age 64 for those without the coverage.

Active employee coverage—Nearly two-thirds (65%) of employers continued to offer health care benefits to their active employees (down from 70% in 2001), although the offer rate varied significantly according to employer size. Coverage availability was nearly universal among employers with at least 500 workers, but only 61% of these employers offered the benefit to part-time employees, an expanding proportion of the labor force.

Health care reform—Employers mostly favored an individual mandate if individuals can afford it, purchased either through their employer or on their own (53% favor this); followed by the federal government reimbursing employers for health care expenses above a certain level (46%). However, there was less support for single-payer (29% support this) or employer “play or pay” (31%).

Same-sex domestic partner coverage—Nearly one-fourth (24%) of all employers, but 34% of large employers, offered this coverage. The larger the employer, the more likely it is to offer the benefit: 74% of the largest employers offered it (continuing to rise from 68% in 2007 and 62% in 2006).

Coverage for spouses—A small proportion of employers limit election of coverage for spouses who have coverage available from another source (8% of large employers in 2008, with another 6% considering it for 2009, and 15% of the largest employers).

Worksite clinics—Nearly one-third (32%) offered on-site or near-site medical clinic for occupational health care services and 13% offered one for primary care services.

The full survey report, including tables of responses by employer size, region, and industry, will be published in late March 2009. The report alone is available for $600 and for $1,200 with the tables. For further information, visit http://www.Mercer.com/ushealthplansurvey, or telephone Tara Lewis at (212) 345-2451.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

Visit our News Library to read more news stories.