Minnesota employers see 4% health cost increases

A new survey finds health benefit costs for active employees in Minnesota are up 4% this year to an average of $12,850 per worker.

The report from New York-based benefits consultant Mercer says Minnesota employers expect the pace of health benefit cost increases to pick up slightly next year to a 4.4% pace.

The Mercer study looks at the average cost of coverage per employee, a figure that blends the cost of coverage for both individuals and workers who receive family coverage. In September, the California-based Kaiser Family Foundation broke out the cost of family coverage in employer plans and found the average annual cost just for those employees had pushed above $20,000 for the first time.

"This is higher than what it should be," Rey Balcazar, a consultant with Mercer's health business in Minneapolis, said of the 4% rate of increase. "Inflation was running last year at a little bit over 2%."

Across the country, Mercer says the average total health benefit cost per employee is growing 3% this year to $13,046. This is the eighth consecutive year of health benefit cost growth in the low single digits, the consulting firm says.

"Health benefit cost management remains an imperative for most organizations," Mercer said in a summary of the national results.

The new study is similar to past Mercer reports in suggesting average premiums in Minnesota are slightly lower than the national average. And, like earlier reports, employers here say they expect premiums to increase at a pace that looks slightly higher than the rate expected by peers across the country.

The Kaiser survey found distinct challenges for low-wage workers, since they are less likely to be offered employer coverage and must pay a larger share of the premium when they have the chance to buy it. In the Mercer survey, 42% of large and midsize employers said addressing the cost of coverage for low-wage workers was an important or very important strategy going forward.

Compared to double-digit increases more than a decade ago, premium increases have been relatively low the past several years. One reason is that employers have been passing on more costs to workers by way of higher deductibles and other out-of-pocket spending requirements for those who use health care.

The Mercer survey found that most large and midsize employers are putting a pause on expanding these cost-sharing requirements. That's true in Minnesota, too, Balcazar said.

Instead of continuing to pump up deductibles, more employers are now looking at what Balcazar described as innovative strategies, such as programs that encourage patients to use "telemedicine" or online health care services for basic needs rather than visits to clinics.

"It's more cost-effective that way," Balcazar said.