Human Capital & Careers

Health-Care Cost Growth Increased in 2018

An average 3.6% rise in employers' health-benefits costs was up a point from last year and once again exceeded the general inflation rate.
David McCannNovember 8, 2018
Health-Care Cost Growth Increased in 2018

Employers’ costs for health benefits ticked upward this year by 3.6%, a full percentage point higher than the 2017 rate, according to new research by Mercer.

Still, overall growth in health-care costs remains moderate, averaging 3.3% annually over the past five years compared with an average of 5.7% over the prior 10 years, according to Mercer. But even the slower recent growth rate exceeds the overall national inflation rate.

The new data is based on a national probability sample of 2,409 public and private employers with at least 10 employees. The study was conducted during the summer, when most employers have a good fix on their costs for the current year.

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As usual, cost hikes were higher for small employers (fewer than 500 employees), rising by 5.4%. For those with 500 or more workers, the average growth was 3.2%

Prescription drugs remained the top cost driver, up by 7% for larger companies, while their costs for specialty drugs surged by 12%.

Employees paid an average of 25% of the total cost of coverage through paycheck deductions, or nearly $3,200 per employee. That amount doesn’t include their out-of-pocket spending — such as for copays — for health-care services.

Among the smaller employers, the average in-network deductible amount under PPO plans rose sharply in 2018. It reached $2,023 for individuals, up 5.5% from last year. Most large employers did not raise deductibles in PPO plans, the plan type with the highest enrollment, and on average their workers’ deductibles rose by just 1.7%.

“Employers are very aware of the burden that high health-care costs places on employees,” said Sharon Cunninghis, U.S. leader of Mercer’s health business. “We’re helping them implement cost-saving strategies that don’t shift expense to employees and can actually improve affordability, access and outcomes.”

Such strategies include better clinical management of specialty drugs, preventing and properly treating opioid addiction, and steering individuals to high-quality, cost-effective providers.

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