DC Health Plan Adoption Set to Grow

“Employers are still in the information-gathering phase, learning about private exchanges,” says Tiffany Wirth, executive director of the Healthcare Trends Institute.

A new study shows an increased interest by employers in defined contribution (DC) health plans.

The Healthcare Trends Institute polled more than 250 human resource executives, benefits managers and benefits decisionmakers from companies of various sizes and industries in September through November 2014 and found 77.5% have some familiarity with DC health plans, compared to 59.4% last year. More than 61% of employers indicated they are looking into offering a DC health plan for 2016. By comparison, only 11.1% of respondent to last year’s survey said they were considering offering a DC health plan for 2015.

“Employers are still in the information-gathering phase, learning about private [health care] exchanges,” said Tiffany Wirth, executive director of the Healthcare Trends Institute, during a webcast.

Wirth noted that the survey showed a significant jump in high-deductible health plan (HDHP) use from last year, and more than half of companies indicated they are using some kind of wellness initiative with employees. She said the growth in the use of HDHPs and health savings accounts (HSAs) is expected to correlate with growth of DC health plans over the next few years.

Sander Domaszewicz, principal and senior consultant at Mercer, noted that Mercer’s National Survey of Employer-Sponsored Health Plans also shows increasing interest by employers in using private health care exchanges to provide health benefits to employees. On average around 28% of employers said they are planning to move to one in the future.

According to Domaszewicz, employers are motivated to cut the cost of offering health benefits to employees. The Mercer survey showed the cost of offering health benefits per employee only increased 3.9% in 2014. It also showed that employers using best-practice cost-control strategies achieved the lowest health care costs.

Domaszewicz explained that Mercer looked at 25 different tactics employers can use in an attempt to control health care costs, and it looked at cost for those using seven or fewer tactics, as well as those using 15 or more tactics. The analysis found a more than half-percent difference in costs between the two employer groups.

“With innovation driving new cost management strategies, employers have more confidence and more employers than ever say they will stay in the game,” Domaszewicz said.

Chris Byrd, president and chief operating officer at Evolution1, a provider of technology and payment services to the health care benefits industry, noted that over the last two or three years, employers have reevaluated their entire benefit strategy and looked at all their options. He cited a Kaiser study that showed more than half of employers shopped for new insurers in 2014, and more than one-quarter actually changed insurance providers.

According to Byrd, analyzing data from the U.S. Census Bureau, Accenture and Kaiser shows about 40 million consumers are projected to be in private health care exchanges over the next five years.