Employers Evaluating Health Benefits Strategies

May 15, 2013 (PLANSPONSOR.com) - Employers are highly concerned about the cost implications of the Affordable Care Act (ACA) to their organizations, new research finds.

Yet, almost all employers participating in roundtables held by professional services firm PwC are considering continuing to “play” by providing some level of health coverage, at least to most of the workforce.  

A related survey found 41% of employers are concerned about an increase in company cost, and one-quarter are concerned about the 40% excise tax on high cost coverage. Fourteen percent of respondents are concerned about their ability to provide current benefits or any benefits at all, and 14% indicated concerns about compliance and reporting requirements. The ability to avoid penalties (4%) and providing benefits to employees who are currently not eligible (2%) were other selected issues.  

According to the roundtable discussions, some employers have looked at different ways to play, for example, by  providing different benefits or  contribution levels for different employee groups. However, absent some needed guidance about nondiscrimination rules, it is difficult for them to move forward, and options for replacing employer-sponsored coverage and paying penalties are still too immature for most employers to seriously consider for their active employee population.  

Most roundtable participants had not yet considered potentially leveraging public exchanges and paying a penalty to enable employees more affordable options, but were intrigued with the idea. This approach made more sense for companies with more part-time or seasonal and/or low-wage workers. Employers with more stable and higher paid workforces were less interested in this approach.

Most employers continue to question the value of private exchanges. None of the roundtable participants had decided to join a private exchange and none had taken steps in that direction.  

Nearly half (47%) of survey respondents said either that they may consider joining a private exchange after careful evaluation or that they are undecided. Twenty-nine percent said they want to wait and see if the health exchanges deliver value. Six percent will not consider joining a private exchange because they want to be able to have control over benefit and vendor choices.  

Among those who said they would consider joining a private health exchange, the reasons are reduced cost (6%), the transition to a defined contribution (DC)-style health plan (6%), employee choice (3%) and reduced administration (3%).  

Survey respondents were allowed to choose two highest priorities or changes in their health benefits strategy going forward. Twenty-two percent selected “bringing consumerism mainstream,” and 19% chose “improving engagement in wellness and health management programs.” Seventeen percent said changing eligibility and contributions to optimize shared responsibility penalties was one of the two highest priorities, and 14% selected “workforce management.” Thirteen percent chose “reducing benefit levels or adding lower-cost options,” and 8% indicated moving to a DC approach was one of the highest priorities or changes.  

PwC recently convened several roundtables of employers in New York, Chicago, and Atlanta. It spoke with 34 major employers.  

More information from the discussions and a related survey are here.