If the national numbers are any indication, employers can generally expect to pay moderately more to provide employee health coverage next year, although any increase comes on top of a cost that is already higher than ever.
The annual survey of employers by global benefits firm Mercer pegs the average employer cost nationally for health benefits at $12,380 per employee for 2018, or 3.6 percent higher than last year.
The per-employee cost in Michigan is a little higher, averaging $12,666, or up 2.6 percent from the year before. Michigan employers responding to Mercer estimate they will pay 5.8 percent more in 2019 if they maintain the same health benefits as they had in 2018, and 3.1 percent more after changing their plan design or vendor.
While the 2018 premiums increases continued a period of rate moderation of recent years, Mercer points out that the five-year cost trend of 3.3 percent still outpaced the rate of inflation.
With low unemployment and tight labor markets, employers are getting maxed out with how much of the cost for health coverage they can put on employees and still attract and keep good people.
Michigan companies answering Mercer’s survey required employees to pay 20 percent of the premium. That compares with the national average of 25 percent.
The requirements for employees to pay a larger share of the premiums also come on top of more employers moving to the increasingly commonplace high-deductible health plan, which has been a trend over the past decade.
One of the emerging tactics more businesses are now adopting to mitigate costs goes to the culture an employer cultivates within their organizations, according to Mercer.
While using care management to contain high-cost medical claims remained the top tactic of midsize and large employers, “creating a culture of health” now ranks as close second. In other words, companies that can fashion a workplace culture that helps keep employees healthy and improve their health can put a check on their medical claims and insurance premiums.
The idea ranks higher today as employers work to control the cost of health coverage as they compete for talent.
“Not sure where it’s going, but it’s definitely in line with what we see clients choosing to do the last six to 12 months. There’s a lot of focus in that area,” said Mick Young, principal and office business leader for Mercer’s Grand Rapids office.
“A lot of that is the situation employers are in to attract and retain talent. Employers are probably spending more time than ever now trying to shrink the pie as opposed to just carve it up between employees and employers, and trying to find things where they can shrink the total cost of care before they share it,” Young said. “Across the country, definitely embracing new ideas and new ideas and strategies are clearly something we’re strongly advocating. You can’t not look at those anymore. You have to pay attention to everything that will shrink the cost.”
Nearly 80 percent of employers in the Mercer survey rated “managing high-cost claims” as either very important or important. Moving up the list was the idea of “creating a culture of health,” which 76 percent ranked as very important or important. That’s six percentage points higher than a year earlier.
As more and more employers focus on a healthy workplace culture, the idea has begun to go beyond merely serving healthy foods in the workplace cafeteria or during employee meetings, banning smoking at work, or having an on-site fitness center, which one-third of the respondents to Mercer’s survey now provide.
Mercer notes that a separate analysis it conducted “suggests that one of the most important steps an employer can take is to include support for a healthy workplace culture in the company vision or mission statement, since this has a ripple effect throughout the organization.”
Some 27 percent of all midsize and large employers also place a priority on employee well-being as part of their culture, versus 23 percent last year. Among corporations with 20,000 or more employees, half now place a priority on employee well-being, up from 43 percent last year.
Sidebar: What’s next with health benefits costs?
Here are some of the key results among Michigan employers responding to Mercer’s annual health benefits cost survey.
- Total benefits costs increased 2.6 percent in 2018 to average $12,830 per employee.
- Employers expect 2019 costs to increase 5.8 percent if they made no changes to their health plan, and 3.1 percent after they made changes to benefits.
- On average, employers required employees to pay a 20-percent share of the premiums.
- The average employee share of the premiums this year for employee-only coverage is $165 monthly for a PPO plan, $114 for an HMO policy, and $82 monthly for a high-deductible plan with a health savings account.
- 62 percent of respondents offered a high-deductible consumer-directed health plan coupled with a health saving account.