Employer health insurance costs headed up in 2013
Survey • After break this year, firms brace to manage increases.
Published: November 20, 2012 10:03PM
Updated: March 6, 2013 11:33PM
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Paul Fraughton | The Salt Lake Tribune Dr. Spencer Scoville, who is employed by US Synthetic to run its medical clinic at the company's headquarters in Orem. Monday, November 19, 2012

Utah companies that provide health insurance benefits to their employees got a break in 2012, but relief from relentless cost increases apparently was only temporary.

The total cost of health benefits for employees increased an average of 4.9 percent this year, to $10,733 per employee, according to a statistically valid survey of three dozen Utah companies by consulting firm Mercer.

Nationally, the cost increase was 4.1 percent, the smallest since 1997, as companies moved more employees into cheaper consumer-directed health plans and stepped up their cost-management efforts. Employers spent an average of $10,558 per employee.

“Overall, it really is the health management efforts that employers have been making, not only in Utah but across the entire country,” said Nicole Cozzo, a Mercer principal in Salt Lake City.

In Utah, the hiatus is expected to be short term. The Mercer-surveyed employers said their costs would rise by 9.6 percent next year if they made no changes to their current plans. Because many are making changes or switching insurance companies in search of lower rates, they expect to hold the increase to 6.8 percent, although for some costs could be much higher .

By contrast, employers across the U.S. expect a 5 percent increase in 2013, according to Mercer. But, as in Utah, the “relatively low” jump reflects changes they plan to make to reduce costs. Without changes, their expenditures would rise by an average of 7.4 percent.

Cozzo said costs will rise next year as more elements of the Affordable Care Act phase in. Employers will have to cover more employees than they have in the past or pay a penalty, she said.

Several Utah companies that weren’t contacted by Mercer said their 2012 cost increases were less than in previous years. None could point to specific reasons, but some speculated privately that insurance companies may have been trying to buy their business. The political climate in Washington may have been a factor, too, they said.

“We have a wonderful agent. She was able to convince them that with the future of our company they should give us a good deal,” said Cindy Dayton, administrative manager of Aribex Inc., a medical device maker in Orem. “She got us 6 percent. We were thrilled.”

Next year, however, Aribex is facing a 19 percent increase. The company has not decided whether to accept such a steep hike or take another route. Because most of the 58 employees like the current health plan, and the bids from other health insurance vendors aren’t any better, Aribex may stay put.

“I’m pretty much freaking out over it,” Dayton said.

David Hill, general manager of Cameron Construction in Salt Lake City, said his company was able to hold this year’s increase to 5 percent. But that’s because Cameron decided to go with a new insurance company after the previous provider demanded an 11 percent increase.

Jumping to a different insurance company didn’t sit well with Hill, but he felt Cameron had no choice.

“It’s a disruption for the employees, but we had to do something,” Hill said.

Cameron’s 2013 insurance year began Oct. 1. The new insurance provider sought a 20 percent increase from the company. Hill was able to negotiate the increase down to just under 14 percent, after the company set up a wellness program and was able to induce eight of 24 eligible employees to enroll.

US Synthetic, a manufacturer of diamond inserts for drilling tools, saw a 13 percent increase in 2012, largely because the company offers a “rich” health insurance plan that it wanted to continue offering its 820 employees in Orem, said David Brady, vice president of human resources.

Next year, the company’s increase will be just 1 percent, less than the 4 percent that US Synthetic expected. Brady said that’s because the company opened a health center in October that is staffed by a salaried physician and a medical assistant. Already, the clinic is seeing about 60 employees a week.

“We don’t have a lot of data, but we expect it to be half the price of what we experience out in the community,” Brady said.

Mercer’s survey of Utah employers also found:

• 82 percent will shift more cost to employees next year by raising deductibles, co-pays, out-of-pocket minimums and employees’ share of premiums.

• 69 percent offered a consumer-directed health plan with an attached health savings or reimbursement account in 2012.

• 6 percent said they probably will terminate their medical plans within five years.

pbeebe@sltrib.com

Twitter: @sltribpaul