Employers Using Several Strategies to Control Health Care Costs

November 29, 2012 (PLANSPONSOR.com) – A survey from ADP indicates employers are using several strategies to control health care costs.

Seventy percent of midsize companies and 60% of large companies experienced a significant to moderate increase in the cost of providing health care benefits to employees over the last year, according to the ADP Wellness survey. The vast majority of HR/benefits decisionmakers interviewed (91% in midsize companies and 90% in large companies) cited controlling the costs of health care as either a medium or high priority.  

Thirteen percent of midsize and 21% of large employers have already downsized their work force as a direct result of health care costs. The survey indicates an additional 3% of midsize and 7% of large employers have already made the decision to downsize in response to health care costs, but have not yet done so. Nineteen percent of midsize and 25% of large employers are still considering downsizing but have not yet made the decision. Overall, the survey found large employers are more likely than midsize employers to take actions directly impacting the size of the work force as a result of rising health care costs.  

Another strategy used by employers is to eliminate higher-cost plan options and designs. The survey results show that 46% of HR/benefits decision makers in midsize and 48% in large companies indicate the cost of providing employer-sponsored health benefits has reduced the number of plan options that they make available to employees.  

Employers are also asking employees to share or increase their share in health care costs. Only 17% of midsize companies and 15% of large companies pay the total cost of health insurance for their employees. 

Does shifting the cost of health care to employees mean employees will leave their current employer? The survey results reveal that employers do not think so. Sixty-nine percent of midsize employers said they do not think cost shifting will have a negative impact on employee retention, as did 61% of large employers. However, 22% and 30%, respectively, said it will.  

Forty-four percent of midsize and 79% of large employers who responded to the survey indicated they are offering wellness programs. Most employers cited improving employee health (81% midsize and 78% large) and controlling health care costs (64% and 71%) as reasons for doing so. The survey indicates midsize companies have been offering wellness programs to employees for about six years and large employers for about six-and-a-half years. An average of 51% of employees in midsize companies and 39% of employees in large companies participate in these programs.  

One-quarter of midsize companies and 22% of large companies measure the return on investment (ROI) of their wellness programs. Among all companies who offer wellness programs, 30% of midsize companies and 25% of large companies do not measure ROI and do not plan on doing so.  

Whether or not an employer measures ROI, the data indicates they are keeping track of what their senior executives think. A majority of midsize companies (53%) and large companies (60%) report that the wellness programs they offer meet or exceed expectations in regards to reducing overall health care costs.  

The survey includes input from 507  HR/benefits decisionmakers in U.S. companies, including 254 from midsize organizations (those with 50 to 999 employees) and 253 from large organizations (those with 1,000 or more employees).