Benefits June 11, 2014

Employers Considering New Tactics to Tame Health Care Costs

June 11, 2014 (PLANSPONSOR.com) - While employee cost shifting remains the most prevalent strategy for employers to reduce health care costs, there is growing interest in adopting new tactics.
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According to Aon Hewitt’s soon-to-be-published Health Care Survey of more than 1,230 employers covering more than 10 million employees, 52% said their current health strategy is focused on traditional trend mitigation approaches, such as employee cost shifting. However, just 21% said this would be their preferred approach in three to five years.

Instead, employers are considering new tactics that will require more action from employees. In the next three to five years, more than 60% of employers plan to “gate” employees to richer designs, where employees are required to complete a “task” to access richer design options. About one in five employers gate their employees today.

“Gating strategies are becoming an increasingly attractive incentive technique among employers as they look to improve the health of their employee populations,” explains Jim Winkler, chief innovation officer of Health & Benefits at Aon Hewitt. “For example, employers may offer a basic high-deductible plan to their entire work force, but make a richer PPO [preferred provider organization] option available to those employees who complete a health risk questionnaire or biometric screening.”

The survey also found 68% of employers plan to adopt reference-based pricing—where employers set a pricing cap on benefits for certain medical services for which wide cost variation exists with no discernible differentiation in quality. Just 10% of employers have adopted reference-based pricing as a tactic today.

A recent analysis by  the Employee Benefit Research Institute (EBRI) examining actual health claims data for more than three million individuals from 2010, found if reference pricing was adopted for all workers with employment-based health benefits for the six health care services it analyzed, spending on employment-based health benefits would fall about 1.6% (see “EBRI Presents New DC Approach to Health Benefits”).

In addition, the survey found, in the next three to five years:

  • 72% of employers are or will be reducing subsidies for dependents;
  • 52% of employers anticipate using unitized pricing—where employees pay per person and not individual versus family—up from 5% today;
  • 42% of employers are considering offering high-deductible health plans as a full replacement plan, up from 15% today;
  • 24% of employers plan to offer employees tools to guide decisions in plan selection and utilization, up from 19% today; and
  • 92% plan to offer cost transparency tools, up from 49% today.

 

“Despite the long-term promises of innovative strategies, employers are still gravitating towards existing cost control tactics because they can see immediate benefits,” says Winkler. “However, these traditional cost-sharing approaches will not be as effective in the future, and employers will need to adopt multiple strategies to improve the foundation of how benefits are delivered, including funding, design, clinical and provider system changes.”

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