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Iowa Health Benefit Costs Surpass National Average

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DES MOINES, Iowa -- Health benefit costs for working Iowans increased 7.7 percent in the past year, outstripping the national average, according to Mercer's 2011 National Survey of Employer Sponsored Health Plans.

The 7.7 percent increase outpaced a nationwide increase of 6.1 percent, according to the Mercer survey. It brought the average cost of employer-sponsored health benefits in Iowa above $10,000 per employee for the first time, at $10,081. That amount was just $1 higher than the national per-employee average cost.

Angela Villhauer of Mercer's Iowa City office said Iowa's higher average increase is directly related to the greater difficulty smaller employers are facing in controlling health benefit costs, and the higher proportion of smaller employers in Iowa.

"In Iowa, over half of the respondents were smaller employers," said Villhauer said. "Their costs were rising much quicker than for larger employers."

Smaller employers have been slower to adopt employee-driven health benefit programs to control costs than larger employers, Villhauer said. Those programs use tactics such as higher insurance deductibles combined with special health savings accounts to encourage employees to avoid overspending.

The Iowa increase was lower than last year's average increase of 7.9 percent in the Mercer survey, and just under the 7.4 percent increase they forecast for 2011.

Iowa employers said they expect health benefit costs for next year to increase by 8.7 percent before plan changes, and 4.6 percent after they change their plans to dampen cost increases.

The employee benefits consultancy said that 2,844 employers nationally responded to its annual survey, which includes both public and private organizations with 10 more employees.

To combat rising costs, a record number of employers added incentives for employees to participate in wellness programs and added consumer-directed health plans.

Still, overall growth in the average total health benefit cost per year slowed slightly to 6.1 percent from last year's 6.9 percent.

Fifty-one percent of employers said they plan to shift costs to their employees in 2012 by raising deductibles, co-payments, out-of-pocket maximums, or other strategies.

A greater percentage of Midwestern employers than employers nationwide indicated they plan to terminate their medical plans after state insurance exchanges begin operating in 2014. The difference was tart, with 22 percent of Midwest employers indicating they are "likely or very likely" to end their health insurance offerings compared to 9 percent of large employers nationwide 19 percent of small employers nationwide.

The survey found a sharp increase in the use by employers of incentives or penalties to encourage higher participation rates in health management programs. Among large employers 33 percent provided incentives or penalties to encourage participation, up from 27 percent last year.

The most common incentive offered to employees for completing a health assessment five years ago was a token gift or cash. This year, the survey found the most common incentive was a lower premium contribution by the employer. The midpoint of the reductions reported by employers was $240.

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