November 20, 2013

Consumer-directed health plans grow slowly in area companies

A Mercer survey said the average total cost per employee of an employer-sponsored health benefits plan this year was $10,155 in the Kansas City area, more than 5 percent lower than the national average.

The average total cost per employee of an employer-sponsored health benefits plan this year was $10,155 in the Kansas City area, more than 5 percent lower than the national average.

The total cost, published in a report released Wednesday by Mercer, a benefits consulting company, includes the amount paid by employers and employees.

According to Mercer’s 2013 National Survey of Employer-Sponsored Health Plans, Kansas City’s average cost stayed lower despite a 5.2 percent increase from 2012, more than the national average of 2.1 percent.

“We didn’t change plan types as fast as some of the country,” said Mark Whiting, a principal in Mercer’s Kansas City office, noting a stronger national move to cost-saving benefits plans.

The survey said the area’s lower-than-national-average total cost for employment-based plans in Kansas City was influenced by continued enrollment in health maintenance organization plans nationally.

It’s counterintuitive for most consumers, but HMO costs to employers and employees are higher than those of preferred provider organizations or other plans. Thirteen percent of covered employees in the Kansas City area are in HMO plans this year, compared with 18 percent nationally, which has helped moderate the local cost average.

Also, the comparatively lower cost of living in the Kansas City area helps create a lower overall health care cost than in many U.S. cities, Whiting said.

The lower-than-average total cost also reflected a slow local trend toward enrollment in consumer-directed health plans, which are characterized by high deductibles and a focus on preventive care. About one in five covered employees in Kansas City area businesses is now in these consumer-directed plans, a slightly higher share than nationally.

The data include survey participation from 44 Kansas City area employers among 2,842 employers surveyed nationally.

The full report is at


The survey also found that area respondents “aren’t optimistic about 2014,” Whiting said. “They anticipate costs will rise by 10.6 percent if no changes are made … well above the national average of 8 percent.”

Higher deductibles for area employees, stronger preventive programs and more consumer-directed programs will be used in an attempt to keep 2014 per-employee cost increases at 5.6 percent locally instead of the 10.6 percent expected if no major plan changes are made, the report indicated.

Nationally, employers said they expect an 8 percent cost increase if no plan changes are made and a 5.2 percent increase if they make major plan changes.

Whiting said the Kansas City area employers who participated in the survey expressed concerns about “typical” health care cost increases as well as the continued effects of the Affordable Care Act in 2014.

One in nine Kansas City area employers participating in the survey said it is likely to terminate its employee health benefit plans within five years. The local sample was too small to break down any difference between large and small employers.

Nationally, nearly one-third of small employers, with fewer than 500 employees, said they are likely to drop their employee health plans within five years. Only 6 percent of large employers said they are likely to stop offering employee health care within that time frame.

Whiting said a survey result that surprised him was a lack of understanding among employers about a potential cost impact of the ACA in 2018. About one-third of employers are at risk of triggering a 40 percent excise tax on health coverage that costs more than $10,200 for an individual or $27,500 for a family.

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