Health Plan Costs Rose Significantly for Small Employers in 2017

Employers across the board saw health plan costs rise for a variety of reasons, but employers with less than 500 workers were especially vulnerable to cost effects, according to a national survey from last year.

Most small employers have faced increasing costs associated with their health plans, while suffering from a lack of leverage and resources to manage the costs.

Though health benefit cost growth has remained steady at 3% annually, a survey of employer-sponsored health plans conducted by Mercer, a healthcare consulting firm, found that employers of varying sizes faced a wide range of health plan cost increases during 2017.

Employers with 10-499 employees:

• 34% saw costs increase by more than 10%
• 29% saw no change
• 19% saw costs increase 5% or less
• 18% saw costs increase 6 to 10%

Employers with more than 500 employees:

• 31% saw no change
• 28% saw costs increase 5% or less
• 22% saw costs increase 6 to 10%
• 19% saw costs increase more than 10%

Employers with more than 20,000 employees:

• 50% saw costs increase 5% or less
• 36% saw no change
• 14% saw costs increase 6 to 10%
• 11% saw costs increase more than 10%

The survey attributed the cost increases to a number of factors, namely expensive new treatment options and a rapidly aging population. A new cost driver is the slow rise of uninsured patients, which ticked up in 2017 and is likely to lead to providers shifting the costs of uncompensated care onto employer health plans, according to Mercer. The firm highlighted the importance of maintaining a vibrant workforce in order to counter the effects of rising costs associated with uninsured populations.  

"Employers need to manage benefit cost and help employees thrive," the study read. "These two goals may sound as if they are in opposition – but they don’t have to be.  Employers can slow cost growth while helping their employees to receive better care and a better patient experience."