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Mercer

Early results from a Mercer survey made headlines this week with the news that employers are projecting that per-employee health benefit cost will rise by an average of 4% next year after they make planned changes. That’s in line with the moderate cost increases we’ve been seeing over the past few years. What was more eye-opening was finding that underlying cost growth -- the change in cost employers would see if they made no changes -- has slowed to just 5.5%. That’s a gap of just 1.5 percentage points -- the smallest we’ve seen yet.

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Confronting issues around healthcare costs is a significant challenge facing today’s small- and medium-sized businesses. While you might think your size limits your options, that’s not necessarily the case.

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Did you know that, on average, the sickest 4% of the population represents 41% of the total allowed medical and pharmacy spend? It’s hard to believe -- and even harder to manage. That’s why we created Mercer Health AdvantageSM (MHA), a proprietary, high-intensity care management program designed to manage care for employees with serious/chronic conditions -- and we’ve seen some great results. In fact, according to a study released this week, employers who offered MHA realized a combined average return on investment* of $2.70 in health care savings for every $1 spent.

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The current employee tax exclusion for employer-provided health benefits came under scrutiny by lawmakers at an April 14 hearing held by the House Ways and Means Committee. Hearing witnesses included experts who argued that capping the employee income tax exclusion and providing universal tax credits would help to raise workforce wages, among other advantages. But a third witness warned that capping or ending the tax exclusion would undermine employer-sponsored coverage by removing a key incentive for employers to offer health plans, and break up employer risk pools that now include participation by younger, healthier workers.

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When employers are asked how they plan to control health benefit cost over the long term, they talk about improving employee health. This focus on employee health is one factor fueling growth in worksite clinics. Last year, Mercer’s National Survey of Employer-Sponsored Health Plans found that 29% of employers with 5,000 or more employees provided an onsite or near-site clinic offering primary care services, up from 24% in the prior year. Mercer followed up with these employers in a new, targeted survey on worksite clinics. Of the 134 respondents, 72% of those whose clinics provide general medical services said that managing employee health risk and chronic conditions is an important objective for the clinic.

 

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There’s been a fair amount of buzz about this Bloomberg article, which concludes that the ACA has caused “barely a ripple in corporate America” in terms of its effect on profits. Their findings were based on a review of conference-call transcripts and interviews, and it makes sense when you consider that most employers – and virtually all “major U.S. employers” – already provided comprehensive health coverage to employees that met the new requirements for value and affordability. This is an important point, and one that sometimes gets lost in all the debate. It should also be acknowledged that employer health benefit professionals have been working hard to slow benefit cost growth and keep this item off the agenda of investor calls. Still, the law has affected different employers to different degrees. Among smaller employers – those with fewer than 200 employees – and those with large part-time populations, the ACA has had a bigger impact. (And even among larger employers, what has helped to keep this item off the agenda of investor calls is the slowing cost trend – the product a lot of hard work by health benefit professionals.) The article also downplays the added administrative effort needed to comply, which for many employers has had to be the focus of health benefits strategy for the past few years. Finally, there’s no mention of the upcoming excise tax on high-cost plans, which will potentially affect employers of every size. Employers have already been taking decisive action to avoid hitting the tax threshold but many acknowledge that it may not be possible. Those that wind up paying tax on already costly coverage may feel they’ve been hit by more than a ripple.

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Employers, keep pushing on health care pay-for-performance! That was one theory to account for the recent slowdown in health care spending growth aired at a forum held by the Altarum Institute in Washington, D.C. last week. This article in Bloomberg BusinessWeek focused on a presentation by Peter Orszag, former director of the White House Office of Management and Budget (now with Citibank) that medical providers, and hospitals in particular, are changing their ways in preparation for the end of fee-for-service reimbursement. He cited the drop in hospital readmission rates as evidence that the industry is responding to what they see as the future – reimbursement that rewards quality, not quantity – even though the incentives to provide more care are still currently in place. It’s an interesting -- and encouraging -- point of view (I’m typing with one hand as I knock on wood), even if another expert at the forum, Uwe Reinhardt, said no one really has a full explanation of the current slowdown in cost growth. FYI, the article includes links to all the presentations.

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