Mercer’s National Survey of Employer-Sponsored Health Plans 2014

SOURCE: MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS

Summary:

Modest health benefit cost growth continues as consumerism kicks into high gear

• Mercer survey finds average total health benefit cost per employee rose

3.9% in 2014

• Enrollment in high-deductible, consumer-directed health plans (CDHPs)

jumps from 18% to 23% of all covered employees following a surge of

new implementations

• Nearly half of large employers (48%) now offer a CDHP, up from 39%

• Private exchanges used by 3% of large employers, with 28% likely to

make the shift within five years

• See selected findings in the following slides and read the full press

release here

1

SOURCE: MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS November

20, 2014

*Projected

Source: Mercer’s National Survey of Employer-Sponsored Health Plans; Bureau of Labor Statistics, Consumer Price Index,

U.S. City Average of Annual Inflation (April to April) 1993-2014; Bureau of Labor Statistics, Seasonally Adjusted Data from the

Current Employment Statistics Survey (April to April) 1993-2014.

FIGURE 1

Average annual health benefit cost increases still low, but edging up

8.0%

-1.1%

2.1%

2.5%

0.2%

6.1%

7.3%

8.1%

11.2%

14.7%

10.1%

7.5%

6.1% 6.1% 6.1%6.3%

5.5%

6.9%

6.1%

4.1%

2.1%

3.9%

4.6%*

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Workers' earnings

Annual change in total health benefit cost per employee

Overall inflation

SOURCE: MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS

FIGURE 2

Employers may see jump in enrollment as they comply with ACA requirement to extend coverage to all employees working 30+ hours/weekLarge employers (500 or more employees)

Took action to comply in 2014,

15%

Waited to comply until

2015, 23%

Already in compliance with

ACA requirement,

62%

SOURCE: MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS

FIGURE 3

Jumbo employers added surcharges in 2014 for employees’ spouses with other coverage available

7%9%9% 9%

2013

2014

3%

20%

5%

27%

2013

2014

Employers with 500 or more employees

Employers with 20,000 or more employees

Spouses with other

coverage are not

eligible

Spouses with other

coverage are not

eligible

Spouses with other

coverage must pay

surcharge

Spouses with other

coverage must pay

surcharge

SOURCE: MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS

FIGURE 4

Sharp increase in offerings of consumer-directed health plansPercent of employers offering/likely to offer CDHP, by employer size

Number of employees 2010 2011 2012 2013 2014

Very likely

to offer in

2017

All employers

(10+ employees) 17% 20% 22% 23% 27% 36%

All large employers

(500+ employees) 23% 32% 36% 39% 48% 66%

Jumbo employers

(20,000 + employees) 51% 48% 59% 63% 72% 88%

SOURCE: MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS

61%

61% 8%

69%

69%

69%

67%

65%

64%

61%

24%

23%

23%

21%

19%

20%

18%

18%

16%

3%

5%

7%

9%

11%

13%

16%

18%

23%

1

1

1

1

1

3

3 9%2006

2007

2008

2009

2010

2011

2012

2013

2014

Traditional indemnity plan PPO POS PPO/POS* HMO CDHP

FIGURE 5

CDHP enrollment growth accelerated in 2014Percentage of all covered employees enrolled in each plan type

*Combined in 2008 due to declining offerings of/enrollment in POS plans. Includes traditional indemnity plans beginning in 2013.

SOURCE: MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS

$10,664 $11,052

$8,789

PPO HMO HSA-eligible CDHP

FIGURE 6

Employers save with HSA-based CDHPs: They cost 18% less than PPOs and 20% less than HMOs in 2014 Medical plan cost per employee (includes employer contributions to HSA accounts)

SOURCE: MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS

31%35%

39%

47%51%

33%

39%

45%

52%

58%

2018 2019 2020 2021 2022

All employers

Large employers (500+employees)

FIGURE 7

About a third of employers at risk of hitting excise tax threshold in 2018 Percentage of employers that will be subject to tax by the specified year if they make no changes to their current plans

Estimates based on data from Mercer’s National Survey of Employer-Sponsored Health Plans 2014; premium trended at 6%, tax threshold trended at 3% for 2019 and 2% for future years

SOURCE: MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS

FIGURE 8

Making consumerism work: Employers provide support to help employees manage their health care spending

Large employers

(500 or more

employees)

Jumbo employers

(20,000 or more

employees)

Transparency tools 77% 86%

Telehealth services 18% 34%

Voluntary benefits offered specifically

to fill gaps in employer-paid benefits

77% 74%

SOURCE: MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS

FIGURE 9

Majority of large employers expect to offer a CDHP by 2017 – but most see it as an option, rather than a full replacement

18%

48%

34%

26%

62%

12%

Large employers (500+ employees)

Jumbo employers (20,000+employees)

Will offer along with other medical plan option(s)

Will not offer CDHPWill offer CDHP as a full replacement to

at least some employees within the next 3 years

SOURCE: MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS

23%

12%

6%

16%

6%4%

2013

2014

Employers with 200-499 employees

FIGURE 10

Fewer employers than ever expect to drop their health plansPercent of employers that say they are “very likely” or “likely” to terminate plans within the next five years

Employers with 50-199 employees

Employers with 500 or more employees

SOURCE: MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS

About Mercer and the Mercer National Survey of Employer-Sponsored Health Plans

Survey methodology

The Mercer National Survey of Employer-Sponsored Health Plans is conducted using a national probability sample of public and private employers with at least 10 employees; 2,569 employers completed the survey in 2014. The survey was conducted during the late summer, when most employers have a good fix on their costs for the current year. Results represent about 600,000 employers and nearly 100 million full- and part-time employees. The error range is +/–3%.

The full report on the Mercer survey, including a separate appendix of tables of responses broken out by employer size, region and industry, will be published in April 2015. For more information, visit www.mercer.com/ushealthplansurvey.

SOURCE: MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS

About Mercer and the Mercer National Survey of Employer-Sponsored Health Plans

About Mercer

Mercer is a global leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s 20,000 employees are based in more than 43 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies(NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 55,000 employees worldwide and annual revenue exceeding $12 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. For more information, visit www.mercer.com. Follow Mercer on Twitter @MercerInsights.

SOURCE: MERCER’S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS