More employers adopting health management programs

Wellness initiatives gained "considerable momentum" as offerings of virtually every type of health management program rose significantly in 2009, according to the study. The results suggest these programs are having an impact:

"Medical plan cost increases in 2009 were about two percentage points lower, on average, among employers with extensive health management programs than among those employers offering limited or no health management programs. And nearly three-fourths of employers that have measured the return on their investment in health management programs say they are satisfied with the year-over-year savings, lower utilization rates or improved health risks. However, only about a third of all large employers have formally measured ROI."

Small employers held down cost increases by sharply raising deductibles for in-network PPO services. Their actions, according ot the study, drove the average PPO deductible among all employers up by about $100 for an individual and $300 for families, to $1,096 and $2,515, respectively. Consistent with past years, employers kept premium contributions relatively stable, choosing to keep the cost of coverage affordable while shifting the burden to those who use health services.

More small employers opt for CDHC

This year also saw a spike in the number of small employers offering consumer driven health plans; CDHP offerings among employers with 10 to 499 employees jumped from 9 percent to 15 percent. According to Mercer's study, this helped drive the percentage of all covered employees enrolled in CDHPs from 7 percent to 9 percent.

Enrollment in PPOs was flat at 69 percent, while enrollment in HMOs fell from 23 percent to 21 percent. HMO enrollment peaked in 2001 at 33 percent and has been eroding ever since. In 2009, the average HMO cost per employee was higher than PPO cost.

"Over the past decade employers have been moving away from HMOs to PPOs, in part because PPOs give them greater flexibility to control cost sharing with members," said Umland. "Now we're seeing growth in consumer-directed health plans, in which cost-sharing is sweetened by an account that allows employees to accumulate any health care dollars they save by spending less or spending more wisely."

CDH plans are still more common among large employers: CDHPs are offered by 20 percent of employers with 500 or more employees, and 43 percent of those with 20,000 or more employees. However, small employers that offer a CDHP are much more likely to offer it as the only medical plan: 55 percent compared to just 9 percent of large employers with CDHPs. With the cost of coverage in an HSA-based CDHP more than 20 percent lower, on average, than the cost of coverage in a PPO, small employers that moved all employees into a CDHP in 2009 were able to realize significant cost savings.

Reactions to health reform

If it came down to offering a health plan or paying a penalty, many employers that currently don't offer plans would rather play than pay (survey of more than 500).

More than two-fifths (44 percent) said they would be more likely to offer a plan to their employees if all individuals were required to obtain coverage – a provision that is also in House and Senate proposals – and 57 percent would be more likely to offer a health plan if they received an annual tax credit that would reduce the net cost of the health coverage to about $2,000 per employee.

On the other hand, less than a fourth (22 percent) say they would support a requirement to pay 4 percent of their payroll into a public or private fund to provide coverage to their employees.

"Small employers, like large employers, want control over how their money is spent," said Havlin. "Using consumerism and health management strategies, employers have been able to keep cost increases stable for the past five years, and even to bend the trend in the right direction in 2009. These results signal their reluctance to sign on to an annual expense over which they ultimately have no control."

Other findings

• The prevalence of employer-sponsored health plans remains unchanged in 2009, at 65 percent of all employers. Among large employers (500 or more employees), health benefits are nearly universal.
• Health care flexible spending accounts are offered by 27 percent of all employers but 85 percent of those with 500 or more employees. The average employee contribution is $1,424, well below the $2,500 cap that has been suggested in health reform proposals.
• COBRA take-up rates rose after Sept. 2008 for half (51 percent) of all large employers.
• Mental Health Parity: About half of large employers (49 percent) were already in compliance with the requirements of the Mental Health Parity Act; 47 percent have made (or will make) changes to their behavioral health coverage to comply, in most cases by removing special coverage limits.
• Spousal coverage: Surcharges or other special provisions to limit election of coverage for spouses who have other coverage available are used by 12 percent of large employers, up from 8 percent in 2008. An additional 5 percent are considering adding such a provision.
• Retiree medical: There was no further erosion in the prevalence of retiree medical coverage in 2009. Among large employers, 28 percent offer an ongoing plan for pre-Medicare-eligible retirees, and 21 percent offer one for Medicare-eligible retirees. Ten years ago, in 1999, these figures were 35 percent and 28 percent, respectively.
• Mini-med or limited health programs: Low-cost plans that are intended to cover routine or preventive care only (as opposed to catastrophic care) – are offered by 7 percent of large employers and 20 percent of those with 20,000 or more employees. Large employers in the wholesale/retail industry, which typically employ a lot of part-time employees, are the most likely to offer these plans (17 percent). There was no growth in offerings of these plans in 2009.
• Worksite clinics: More than a fourth of large employers (27 percent) offer an on-site or near-site medical clinic for occupational health services; 11 percent of large employers offer a clinic for primary care services.