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Mercer

The recent US Supreme Court decision legalizing same-sex marriage seems likely to affect employer offerings of domestic partner (DP) coverage. Many employers that now offer DP benefits chose to do so because their employees did not have a legal right to marry their same-sex partners and thus could not qualify for dependent coverage. But more often than not, DP benefits are also extended to unmarried opposite-sex domestic partners, so a change in policy could affect those couples as well.

 

Offerings of DP coverage have been growing steadily. According to Mercer’s National Survey of Employer-Sponsored Health Plans, over the past five years offerings of domestic partner coverage have risen from 39% to 55% among large employers (500 or more employees). Among jumbo employers – those with 20,000 or more employees – 76% offer DP coverage. There is still a wide variation by geographic region, however. Fewer than half of all large employers in the South and Midwest provide DP benefits (46% and 45%, respectively), compared to solid majorities of large employers in the Northeast and West (60% and 78%, respectively).

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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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In 2015, enrollment in consumer-directed health plans (CDHPs) reached a new milestone -- one-fourth of all covered employees. Mercer’s 2015 National Survey of Employer-Sponsored Health Plans found continued growth in both CDHP prevalence and enrollment rates. Growth has been fastest among large employers. More than half of employers with 500 or more employees now offer a CDHP (59%, up from 48%), and 28% of covered employees are enrolled.

 

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As Labor Day and the end of summer drew near, we noticed a flurry of articles reporting on studies showing the importance of taking vacation, not working insane hours, and perhaps most important, getting enough sleep. Not only does taking vacation prevent burnout, research shows that it improves performance: when you return from time away, you’re able to focus better and think more clearly and creatively. Working more than 55 hours per week puts you at a higher risk for stroke and heart disease and, because of sharp declines in productivity after 55 hours on the job, is ultimately a waste of time.

 

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Spending on specialty drugs continues to be one of the fastest-growing areas of health spending. In an August report, the Congressional Research Service (CRS) references data from IMS Health that found specialty drug expenditures grew 26.5% in 2014, while total US prescription drug spending rose 13%.

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Every year when we tabulate our survey results, we eagerly dive into the results for jumbo employers (those with 20,000 or more employees) to identify and measure movement in the latest health benefit management trends. The jumbo employers have long been the pioneers driving health care innovation. They cover more people, so more at stake. They also tend to have more resources - people and financial - to devote to the cause. Their focus is not just cost, but also includes the other two components of the triple aim - quality and engagement. How do we know it works? Historically they have demonstrated lower rates of increase in health care cost than the overall averages and at the same time maintained richer benefits (lower deductibles, etc). But the real proof is in an analysis we do of 25 best practices across large employers in three areas – plan design, workforce health, and care delivery – where those in the top quartile for most best practices outperform those in the bottom quartile with about one percent lower trend.

 

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As we’ve reported, consumer-directed health plans have mushroomed during the health reform era. In 2015, exactly half of all large employers (those with 500 or more employees) offered a CDHP eligible for a health savings account -- yet only 5% offered it as the sole plan available to employees at their largest worksite. Still, many employers are at least thinking about a full-replacement strategy. 

 

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We noticed “wearables” trending on Twitter a few days ago, and that sent us back to Mercer's National Survey of Employer-Sponsored Health Plans to see if our data was in synch with social media. We found that US employers are clearly on top of this trend, and may even be helping to drive it: Over a third (35%) of organizations with 500 or more employees provide workers with a device to track activity, such as a pedometer, accelerometer, or GPS. Perhaps not surprisingly, employers in the health care industry have moved the fastest — 45% provide employees with a device.

 

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While the recent IRS request for comment on implementing the 2018 excise tax on high-cost coverage gave us insight into what the IRS is thinking, it isn’t the formal guidance that we desperately need. This makes it tough on employers heading to the bargaining table this year. A recent article in The Wall Street Journal highlights the challenges facing the big three automakers as they prepare to negotiate this summer with the UAW, which historically has been very protective of its members’ health benefits. In other words, benefits are rich and costs are high. The law imposes a 40% excise tax on the annual cost of health plan premiums above $10,200 for individual coverage and $27,500 for family coverage. While it’s not clear whether UAW workers are enrolled in plans with costs that currently exceed the threshold, the employers and the UAW are concerned that, if costs continue to rise at their current rate, by 2018 the plans could face significant penalties. If they do, who pays?

 

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A big news story last week was the CMS report on the slowdown in spending on health care in the US in 2013, which the authors attributed in part to a shift to high-deductible consumer-directed health plans (CDHP) in the private insurance market. Our response to that? Just wait until you see the numbers for 2014! As we reported last month, results from Mercer’s National Survey of Employer-Sponsored Health Plans for 2014 show the largest one-year jump in CDHP enrollment, from 18% to 23% of all covered employees. (This followed 2013’s more modest growth in enrollment, from 16% to 18%.)

 

Employers of all sizes, but especially large employers, added CDHPs in 2014. Offerings of CDHPs jumped from 39% to 48% among employers with 500 or more employees, and from 63% to 72% among jumbo employers (those with 20,000 or more employees). While the use of CDHPs has been growing steadily, the trend has accelerated as employers anticipate growth in enrollment in the post-reform era. (As the graph above shows, 66% of all large employers, and 88% of the jumbos, expect to offer a CDHP in 2017.) In 2015 the ACA provision goes into effect requiring employers to extend coverage to substantially all employees working 30 or more hours per week. Well over a third of large employers (38%) were affected by this rule and will need to extend coverage to more employees as a result. What may drive up enrollment still further is that employees who have chosen not to elect coverage in the past now have a stronger incentive to do so — as the minimum tax penalty for not obtaining coverage rises to $325 for 2015 from just $95 this year.

 

 CDHPs offer employers a way to mitigate growth in spending as they cover more employees. The average cost of coverage in a CDHP paired with a tax-advantaged health savings account is 18% less than coverage in a PPO and 20% less than in an HMO: $8,789 per employee, compared to $10,664 for PPOs and $11,052 for HMOs.

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Faced with the prospect of an already-fragmented health care system strained further as more Americans gain health insurance in the public exchanges and through employer plans, employers are turning to onsite clinics as a critical component of their health care strategy. Worksite health services are a way for employers to directly influence health care delivery and provide a convenient and quality product to their employees — enhancing the benefit package while improving productivity.

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A couple of weeks ago we reported preliminary findings from our latest National Survey of Employer-Sponsored Health Plans showing that employers predict an average increase of 3.9% in total health benefit cost per employee. If their prediction is accurate, it will mean a fourth year of cost growth under 5%.*

 

It’s important to note that the 3.9% projection takes into account the changes employers will make to hold down cost growth. If they made no changes, cost would rise an estimated 5.8%. It’s also important to remember that 3.9% is only an average, and that some employers — 23% — expect to see no increase in per-employee cost at all, while 15% are bracing for increases of 10% or more.

 

Range of Projected 2015 Cost Increases

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