Benefits August 27, 2012

Health Care Ruling Affecting Health Benefits Strategies

August 27, 2012 (PLANSPONSOR.com) - Following the U.S. Supreme Court decision about health care reform, two-thirds of companies say it has affected their overall health benefits strategy.
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According to a Towers Watson survey of 440 midsized to large companies, one-third of them are waiting for the upcoming elections or the opening of insurance exchanges before making any significant changes to their health care strategy. Most employers (88%) have affirmed their commitment to offer health care benefits to their active employees for the foreseeable future.  

The 2012 Towers Watson Health Care Changes Ahead Survey found the actions and programs that companies are planning or considering include changing plan options (63%); significantly reducing subsidization of coverage for spouses and dependents (38%); and using spousal waivers or surcharges (29%). Additionally, some employers will pass along a greater percentage of costs to employees. Thirteen percent plan to increase their employees’ share of health care premiums in 2013 by five percentage points or more, while 42% plan to increase employees’ share by one to five percentage points.    

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Towers Watson notes a projected 2013 per employee health care cost of $11,507, an increase of 5.3% from 2012. The $11,507 total cost represents an employer cost of $8,911 per employee and an employee cost of $2,596 per employee. While the overall increase in employee cost sharing is modest, it is meaningful to employees, as it outpaces average merit increases.

Although the rate of health care cost increases has slowed (5.3% projected for 2013 compared with an expected 5.9% this year), a majority of employers (58%) expect they will trigger the health care reform excise tax in 2018 if they do not make changes to their current benefit strategy. As a result, 83% of employers are planning to take steps to control their costs to avoid the tax.   

Nearly three-quarters of employers (72%) state they lack confidence that the exchanges will provide a viable alternative for active employees by 2015, but the story for retirees is very different. Nearly six out of 10 companies with a program are somewhat to very likely to discontinue retiree medical plan sponsorship for post-65 retirees, with 64% considering the same for pre-65 retirees.   

Other findings from the survey include: 

  • More than three-quarters of respondents (77%) view health care benefits as core to their employee value proposition over the next several years, and more than one-third of companies will examine their health care benefits in a total rewards framework by 2013. Another 39% are considering doing so by 2014 or 2015. 
  • The strong growth of account-based health plans (ABHPs) is expected to continue. By 2015, 80% of employers plan to offer an ABHP, up from 61% in 2013. The enrollment within ABHPs continues to increase significantly, moving from single-digit numbers in 2006 to an expected 30% for employers offering these plans in 2013. 
  • Health care delivery continues to evolve, which is leading to the acceleration in use of telemedicine services. Seventeen percent plan to offer telemedicine by 2013, and another 27% are considering offering it by 2014 or 2015. 

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