Employers pay too much for corporate health plans

Inflation on corporate health plan costs fell to its lowest level in more than 20 years, but employers are still paying up to three times as much as they should, according to research.

On average health plan costs went up 3% last year. But despite this drop, many insurers are still applying inflation rates of as much as 10% to the calculation of companies’ annual healthcare premiums, according to the study by Mercer HR consulting.

Medical inflation has fallen because medical and technological developments have pushed down the price of some treatments, insurers are managing provider costs more effectively and the number of people making claims has levelled off. 

However, many insurers have yet to build these factors into the assumptions they use to determine their prices, which means savings are not always passed on to customers as quickly as they should be, said Stephen Clements, principal at Mercer.

“Low medical inflation means employers could benefit considerably from reviewing the cost of their health plans, particularly when negotiating renewal terms,” he said. “Organisations can avoid paying over the odds for medical insurance through intelligent plan design and cost management initiatives.”

Clements warned that organisations often resorted to ‘quick fix’ changes to the design of their healthcare plans when faced with unbudgeted cost increases and little time. 

“This does little to remedy the problem and can reduce the benefit for employees,” he said. “Private healthcare is a highly valued benefit that companies can continue to provide if they manage their medical costs effectively, which includes monitoring their plans to ensure they are not being overcharged and targeting the underlying drivers of costs.”

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