Corporations are waiting to see how the Supreme Court will rule on the health care act, but according to Brad Kimler, executive vice president of Fidelity Investment’s benefits consulting team, they’re taking measures to rein in costs regardless of how the ruling turns out.
A provision in the Patient Protection and Affordable Care Act levies a 40% tax on the annual value of so-called Cadillac plans, health care plans that exceed $10,200 for single coverage or $27,500 for family coverage beginning in 2018. Union plans will reach the cost limit on high-cost health care plans much more quickly, according to Sunit Patel, senior vice president in benefits consulting with Fidelity.
Just as the retirement benefits industry has already seen a shift from defined benefit to defined contribution plans as a cost-cutting measure, companies are thinking about how this can be done in health care. Kimler cites that just as with the excise tax, the cost will fall squarely on employees. “I have yet to meet an employer who will pay that tax,” Kimler told PLANSPONSOR. “Companies will try to stay below that gap” in health care plan design.
When health care exchanges are established in 2014, it is likely that access to medical providers will see some impact as 40 million previously uninsured people begin migrating to lower-cost providers. Insurers are likely to start dealing in narrower networks of providers that have proven track records of greater efficiency. An unintended consequence of this part of the law could be tighter access to medical care, at least in those networks, as providers are likely to see increasing numbers of people seeking their services, Kimler said.
Public exchanges are mostly about providing access, so this part of health care reform, if the law stands, is not as pertinent to corporations. “Fortune 500 companies don’t have an access problem,” Kimler said. Patel pointed out that the exchanges will give early retirees more access to insurance.
Variation in network costs is gaining more attention, according to Patel. This year, he said, health care plans and Medicare will roll out comparison tools. Hospital mortality rates for heart valve replacement, for example, can vary from 5% to 20%. “Health care is finally moving to a retail environment,” Patel said. As these disparities receive more focus, employers and employees are both demanding more information. Insurers have been reluctant to release what they see as proprietary data on costs, but employers will likely see more of this information.
Companies are focusing more on preventive care and wellness programs, especially those that encourage physical activity and activity in groups, which research has shown to be more successful than attempting to go it alone, Patel said. Some companies are handing out Fitbit fitness trackers—wearable devices that measure data such as steps walked—to help employees mark progress and spur competitions like Million-Step challenges. Many firms also offer cash incentives or reductions in premium costs for taking health awareness measures such as weight-loss programs.
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