Behind The Survey Averages: Breaking Down Employer Cost Experience in 2017

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Behind The Survey Averages: Breaking Down Employer Cost Experience in 2017
Calendar09 November 2017

In last week’s post on our just-released survey results, I pointed out that while the average per-employee total health benefit cost rose at a moderate 2.6% from 2016 to 2017, individual employer experience varied widely – from flat costs and even decreases to double-digit increases. It may seem obvious, but it’s worth reiterating that each employer’s situation is different and needs to be considered in context. As seen in the graph below, more small employers – those with 10-499 employees – reported steep increases than mid-sized and large employers (500 or more employees). That’s not surprising, given that the majority of small employers are fully insured and typically have fewer resources to devote to managing their health benefits. In addition, in smaller groups, a few large claims can have an outsized impact on per-employee cost in a given year.

 

But even among the largest employers, those with 20,000 or more employees, more than one in ten reported increases above 10%. While many factors combined to drive cost for these very large employers, they were certainly not immune to the impact of very large claims, which are becoming increasingly common (as discussed in this recent post).

Balancing these high increases were the employers reporting flat costs or cost decreases – about a third of employers overall. In last year’s survey, more than half of employers said they would make changes to their program for 2017 – changing vendors or the type of plans offered, changing plan designs, and implementing strategies to promote higher-quality, more cost-efficient care and programs to address workforce health and well-being. Some of these changes result in immediate cost savings; others have longer-term effects. The underlying trend – the increase employers would see if they made no changes – is still running at 5%-6%, even as employers overall have managed the actual cost increase – after changes -- to just above 3% annually over the past five years. The takeaway? Managing health benefit cost remains an ongoing challenge, and employers with “above average” cost increases are in good company.

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