The economic downturn may provide businesses with an unexpected benefit: A bit of relief in employer health care costs.
Health care benefit costs will increase 5.4 percent in 2012, in what would be the smallest gain since 1997, according to a survey conducted by Mercer released Wednesday. One reason for the decline is a drop in employee use of health services prompted largely by the tough economy, the survey finds. With incomes on the decline, workers may have less money available to spend on healthcare, the study found.
Americans began cutting back on healthcare services during the recession and they haven't stopped, insurers reported in interviews with Reuters. Some insurers said the trend may turn long term even if the economy recovers, Reuters reported, indicating that the costs could stay low for employers.
Still, a slowing economy pushed some to see the doctor less in the Birmingham metropolitan area in 2009, local news website al.com reported at the time. Patients often cut preventative care first in a downturn, putting them at risk for other complications, according to USA Today. A 2009 American Academy of Family Physicians survey found that six out of ten respondents saw a boost in health problems because they put off preventative care, the paper reported.
The drop in employee health care costs could also be due to company programs aimed at improving workers’ health, according to Susan Connolly, a partner in Mercer’s Boston office.
“Consumers are more aware that overuse and misuse of health care services will directly impact their wallets as well as their employer’s budget,” she said in a press release.
Regardless of the reason, slower growth in employer health care costs could be good for workers, according to the survey. Employers will often shift health care costs to employees when faced with a high renewal rate, but if their costs are lower to start with, than employees will likely have to shoulder less of the burden.
Though employer health care costs are set to grow at a slower pace than in recent years, companies may still pass on some of the costs to employees by raising premium contributions, the study found. Employers may be making the move to offset cost increases from enrolling more dependents after health care reform legislation allowed for employees’ children to be covered on their plans until age 26.
Still, the Affordable Care Act, signed by President Barack Obama in March 2010, could help employers drive down healthcare costs in the long term, according to consulting group McKinsey. More than 30 percent of employers will see an economic gain from dropping employee coverage even if they compensated workers with other benefits or a salary boost.