Health Care Benefits Cost Increases to Hold Steady in 2016, National Business Group on Health Survey Finds

WASHINGTON, August 12, 2015 – Health care benefit cost increases at large employers are expected to hold steady in 2016, due in large part to changes employers are making to their benefit programs. At the same time, nearly half of large employers say if they don’t take additional measures to control costs, at least one of their health plans will reach the threshold that triggers the “Cadillac” excise tax under the Affordable Care Act in 2018, according to an annual survey released today by the National Business Group on Health, a non-profit association of 425 large U.S. employers.

According to the survey, employers project their health care benefits costs will increase 6.0% in 2016, the same increase employers would have experienced this year had they made no changes to their plan design. However, many employers expect to keep increases to 5% for the third consecutive year by making plan changes, such as increasing cost-sharing provisions, adopting consumer-directed health plans (CDHPs), and expanding wellness initiatives. The survey, based on responses from 140 of the nation’s largest corporations, was conducted in June 2015.

“The need to control rising health care benefits costs has never been greater,” said Brian Marcotte, president and CEO of the National Business Group on Health. “Rising costs have plagued employers for many years, and now the looming excise tax is adding pressure. Employers only have two more years to bend the cost curve before the excise tax goes into effect in 2018. And while employers are pursuing several strategies to keep their plans under the excise tax threshold, they estimate their actions will only delay the impact by two to three years.” 

Almost one-half of respondents (48%) expect at least one of their benefit plans will hit the excise tax threshold in 2018 if they don’t take action. By 2020, almost three-quarters (72%) expect one of their plans will trigger the tax, while their plan with the greatest enrollment will only be one year behind. Employers, however, are taking action to delay the impact of the excise tax. More than three quarters of respondents (76%) are adding or expanding CDHPs and consumerism tools while 70% are expanding wellness programs.

Employers cited several factors driving rising costs. For many employers (43%), the number one driver of rising health care costs is high cost claimants. Respondents also cited three other cost drivers – the soaring costs of specialty pharmacy, specific diseases or conditions, and overall medical inflation.