Large Employer Healthcare Cost Increases Are Slowing. What About Small Employers?

Oct 17, 2018
| Michael Altiero
Large employer healthcare cost increases are slowing

Healthcare costs in the United States have soared to record highs in recent years, with double digit increases common within the small group market. But even large, Fortune-500 companies have seen rates rise.

These increases have impacted employers and employees alike and have caused major disruptions throughout the business world.

With open enrollment season now here, and 2019 just around the corner, what does the new year have in store for health insurance increases?

Preliminary data released by Mercer revealed some answers to this question.

Employers’ Health Care Spending Increases Will Slow Next Year

In mid-September, Mercer released preliminary results from their National Survey of Employer-Sponsored Health Plans at the annual HR Technology Conference & Expo.

This data is based on the first 1,566 responses to the survey, with the full report and statistics coming later in 2018.

Based on the initial results, Mercer projects that employers making changes to their healthcare plans will spend 4.1% more per employee on average.

If employers didn’t make any changes to their health plans, their costs would increase 5.3% per employee.

How do these numbers compare to last year? In 2018, the projected increase if an employer were to change healthcare plans was 4.2%, essentially equal the 2019 projections.

For employers who didn’t change health plans, the 2018 increase was 6.5%. This is significantly higher than this upcoming year, which is a positive trend for employers and employees.

Are These Results for 2019 the Same for All Company Sizes?

It’s important to note that the results above aren’t broken out into companies of different sizes. Mercer says the common employer that takes the survey has 500 or more employees, and the 4.1% increase result can throw off the significant differences in healthcare cost changes between large and small employers.

While the full survey results, due out later in 2018, will break down findings by company size, for now it is best to look at last year’s survey results to see the major difference that occurs based on the size of an organization.

34% of employers with 10 to 499 employers had healthcare costs increase by more than 10%. Meanwhile, just 11% of employers with 20,000 or more employers had double digit cost increases.

These numbers further illustrate the difficulties small and medium-sized businesses (SMBs) have with healthcare benefits and costs.

We’ll have to wait for the full survey results to see if smaller employer healthcare cost growth will hold or increase in 2019.

What Can Small Employers Do to Contain Rising Healthcare Costs?

The preliminary Mercer survey results go on to explain three ways employers are using technology to save money on healthcare costs:
  • Target specific health problems
  • Make it easy to engage
  • Mine health plan and employee data for actionable insights

You can click here to learn more about each of these strategies.

However, these are much easier for larger employers to implement, and in some cases not possible for smaller employers to take advantage of.

For smaller employers, one way to overcome rising healthcare costs is to explore outsourcing solutions such as professional employer organizations (PEO). Partnering with a PEO allows small businesses to get the same quality and quantity healthcare as larger, Fortune-500 employers while reducing overall costs.

PEOs can also be beneficial for benefit, insurance and financial brokers. Partnering with a broker-only PEO can enable brokers to help clients overcome their healthcare and HR issues, while protecting and growing the book of business.

Small business owners struggling with rising healthcare costs shouldn’t hesitate to reach out to their brokers to learn about other options available that can improve benefit options while saving money.

Stay Tuned for the Full Survey Results

Mercer will be releasing their full 2018 survey results (consisting of responses from around 2,400 employers) later this year and will go into more details around company sizes and the ways employers are managing overall costs.

In the meantime, you can learn more about HR outsourcing and PEO to see how these solutions may be able to help!

Want to learn more about PEOs? Check out our eBook, How Well Do You Know PEO? This eBook provides an overview of the PEO industry as well as helpful information for brokers and employers!

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