Health Reform Prompts Most Employers To Begin Modifications

from Spencer’s Benefits Reports: In the year since the Patient Protection and Affordable Care (ACA) was enacted, employers continue to maintain their health care benefits, implement cost-sharing methods, and assess the long-term impact of reform on their organizations, according to a recent survey released by the International Foundation of Employee Benefit Plans (IFEBP). The survey, Health Care Reform: Employer Actions One Year Later, reviewed actions employers have taken in the 12 months since the ACA became law and explored their plans for the upcoming year. It is the second in a series of IFEBP surveys on the effect of the (ACA) on single employer plans. The majority of survey respondents (62.5%) are focused on making necessary changes to make their plans ACA compliant, the IFEBP found.

“For the most part, employers have moved beyond the ‘wait and see’ phase they were in just a year ago and are beginning to take action,” explained Sally Natchek, senior director of research at the IFEBP. “Although many employers are concerned about rising costs, very few have drastically altered or ended their health care benefits. Most employers remain committed to offering quality health care benefits to their employees.”

Rising Costs, Employee Cost-Share Expected

The majority of employers (60%) have conducted an analysis to determine how the ACA will affect their 2011 plan costs. Among respondents analyzing ACA cost effects, 85% expect their health care costs to rise, with the largest proportion (36%) estimating a cost increase in 2011 of 1%-2% due to the ACA. Although extending coverage to adult children to age 26 is still seen as the top driver of cost increases (by 33.4% of respondents), administrative costs and cost-shifting due to reduced Medicare/Medicaid payments to providers have emerged over the past year as major concerns by 27.5% and 28% of respondents, respectively. Approximately one in ten responding organizations (10.5%) currently is redesigning their primary health plan to reduce premiums and avoid triggering the 2018 excise tax on “Cadillac plans” with vlaues that exceed a specified dollar amount.

In anticipation of increased costs, employers are boosting employees’ share of premium costs (40%), in-network deductibles (29%), and employees’ proportion of dependent coverage cost (28%). Many employers also plan to increase out-of-pocket limits and copayments or coinsurance for primary care (27% and 24% respectively). Also, about one-third of (32.4%) employers have conducted dependent eligibility audits in the past 12 months, or plan to do so in the next 12 months.

Although many employers are looking for employees to help manage rising costs, few plan to eliminate or reduce their health plan benefits as the result of health care reform. Just 2.6% are planning to cut health benefits for new hires, 1.6% are planning to drop dependent coverage, 0.9% will close health benefits to new hires, and 0.8% will discontinue health benefits for active workers or retirees. Less than 1% of employers (0.7%) plan to stop providing employees with health care coverage in 2014, when “play or pay” provisions become effective. This finding is radically different from the McKinsey & Company survey conclusion that 30% of employers will definitely or probably stop offering employer-sponsored insurance in the years after 2014.

Additionally, although required only to extend health care benefits to adult children until age 26, 60% of employers are extending the eligibility requirements to other benefit plans (primarily for dental and vision benefits) to conform to the requirements of their medical plans.

Few Will Maintain Grandfathered Status

Although employers report some benefits of maintaining their plan’s grandfathered status—such as the exemption from the appeals process and the mandatory coverage for preventive care with no cost sharing or annual limits—just 30% (of the 44.6% of respondents whose primary plan is currently grandfathered) expect to maintain grandfathered status beyond the next three years.

“Maintaining grandfathered status will be very challenging for employers,” stated Ms. Natchek. “Plans can lose the status in numerous ways, including reducing benefits, raising coinsurance or significantly raising copayments or deductibles. To remain grandfathered, an employer will be able to make only limited changes in their health care plan. This does not appear feasible for most organizations.”

More Wellness And Related Programs

In light of the ACA, 18% of employers have adopted or expanded their use of wellness initiatives in the last 12 months, and more than one-quarter (27%) plan to do so in the next 12 months. Additionally, 38% are expanding the use of financial incentives to encourage healthy behaviors, and 27% are adopting or expanding their disease management offerings.

High-Deductible Plan Interest Continues

Employers continue to perceive value in the role of high-deductible health plans (HDHPs) for cost management. As a result of the ACA, approximately one-third of responding organizations (33%) are increasing their emphasis on or assessing the feasibility of HDHPs with a health savings account (HSA). Rarely are employers reducing their emphasis or assessing the feasibility of dropping HDHPs.

The survey is based on responses from 1,350 individuals, including benefits and human resources professionals, general and financial managers, and other professionals, who are members of the IFEBP and the International Society of Certified Employee Benefit Specialist (ISCEBS). For more information, visit http://www.ifebp.org/books.asp?7051E.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

Visit our News Library to read more news stories.

Copyright | Privacy Policy | Site Map

©2005-2011 CCH Incorporated or its af

Lower health care costs: Employers struggle to change employee behavior

By Pat Speer, Employee Benefit News

Employers are putting the onus on employees to help curb rising health care costs, and the inability to motivate and change employee habits is prompting concern, according to Aon Hewitt, a global human resource consulting and outsourcing business of Aon Corp.

“As employers wrestle with the reality of continued increasing costs, they are ramping up efforts to ensure cost efficiency, including negotiations with insurers, elimination of ineffective programs, and pursuit of new approaches to motivate employees to use cost effective, high quality providers,” Jim Winkler, Large Employer Segment leader in the Health & Benefits Practice with Aon Hewitt, told Insurance Networking News.

In its 2011 Health Care Survey, Aon Hewitt surveyed 1,028 employers nationwide, and discovered that the top health care outcomes that organizations would like to achieve this year are improving employee health habits (56%), lowering the health care cost trend (49%), decreasing worker health risk (44%), increasing participant awareness of health issues (37%) and enhancing participation in health improvement/disease management programs (37%).

This survey suggests that success may be difficult, as 56% of respondents say motivating participants to change unhealthy behaviors is the most significant challenge to accomplishing 2011 health care program goals. This was followed by issues involving reluctance to change (26%), unpredictability of costs (23%), government regulations/compliance (22%) and managing the health of an aging workforce (21%).

Both companies and health insurers have a vested interest in taking a proactive approach to wellness. In particular, the survey revealed that many companies offer disease management (70%), health and wellness improvement (64%) and behavioral health (60%) as key components to health care strategies. In an acknowledgement that more needs to happen to achieve success, many organizations are looking to expand efforts during the next three to five years and implement strategies that focus on total well being to improve physical and mental health (60%), absence management (53%), and integrated safety and health improvement efforts (50%).

"Despite reform, organizations still face rising costs and worsening population health," says John Zern, Americas Health & Benefits Practice leader with Aon Hewitt. "It's clear that traditional annual trend mitigation tactics alone won't work. As a result, leading employers are implementing a 'house money, house rules' environment, using a mix of incentives, penalties and targeted messaging to reward healthy behaviors."

While some companies are budgeting for a medical trend increase during the next four years, many do not have a long-term increase built into their budgets as of yet. Nearly one-third of respondents (30%) have budgeted an annual medical trend increase between 4% and 7% from 2011 to 2015, and 22% have budgeted an increase of more than 8% during that time. Meanwhile, 42% have not built an annual long-term increase into their budget at this point.

"Employers are spending millions of dollars annually on health care, and yet many report they do not have a specific plan for how best to manage that investment," Winkler says. "Given the risks and opportunities presented by health care reform, it is imperative that employers develop a written strategy for controlling cost and improving health."

Rewarding & penalizing participants

The Aon Hewitt survey also showed that 22% of employers will have programs in place by the end of 2011 to reward participants for achieving specific health outcomes, and 10% will have similar programs to penalize participants for exhibiting unhealthy behavior. However, by 2016, 64% of organizations said they will add programs that reward for good health, while 46% said they will add programs that penalize for unhealthy outcomes.

Respondents currently offer incentives to employees for participation in key initiatives, such as biometric screenings (33%), health risk assessments (33%), wellness programs (31%) and tobacco cessation programs (27%). Conversely, some employers are imposing a penalty for non-participation in biometric screenings (5%), health risk assessments (5%), wellness programs (2%) and tobacco cessation programs (6%).

Money serves as the primary incentive and penalty these employers use to promote employee participation in key programs, including health risk assessments (66% have a monetary incentive; 9% have a monetary penalty); biometric screenings (65% have a monetary incentive; 8% have a monetary penalty); disease/condition management (54% have a monetary incentive; 9% have a monetary penalty); and wellness programs (59% have a monetary incentive; 6% have a monetary penalty).

"In a challenging economy, organizations are using financial incentives, as a mix of rewards and penalties, to motivate behavior change," says Jennifer Boehm, principal in the Aon Hewitt Health & Benefits Practice, and a project leader for the survey. "However, leading employers also recognize that success requires more than just dollars; those organizations also focus on marketing health improvement services, eliminating barriers to needed care and measuring the impact of specific interventions."

Insurers have long sponsored employers’ use of wellness programs to reduce health care costs. But these workplace health care programs have a downside, reports wellnessprograms.com. At issue from a company’s perspective, notes the site, is an insurance carrier’s ability to use information gathered during a wellness program as justification for increasing an employer’s rates at renewal.

(Aon Hewitt contributed to this story.)

Speer is the Editor-in-Chief of Insurance Networking News, a SourceMedia publication.

Employers often fail to estimate costs of absences

By Brian M. Kalish
Employee Benefit News

June 1, 2011

Despite state and federal mandates that require employers track data on when employees are out of the office, companies fail to use the data to manage the associated cost implications, according to a new survey.

The survey of 331 human resources and benefits executives and managers of companies with over 500 employees by Liberty Mutual found an organizational disconnect between collecting absence data to satisfy state and federal regulations and using that data to understand costs and savings to function more effectively.

In the survey, 49% of respondents say they do not know the cost of absence in their organizations. Yet, 53% of respondents say they are focused on being compliant with state and federal leave laws. This turns into what Liberty Mutual calls a failure by companies to convert “data into dollars.”

“[Employers] are so focused on compliance that they are not tracking the cost associated,” says Heather Luiz, Liberty Mutual’s disability and leave product manager. “They recognize it’s an important thing to do, but they’re not looking at it.”

“Employers say it doesn’t cost anything,” besides short- or long-term disability, “but the reality is it does cost them money,” Luiz adds.

According to Liberty Mutual, using Labor Department data, absences could cost companies nationwide as high as $100 billion annually and in 2010, 3% to 5% of an average employer’s workforce was absent on any given day.

Luiz said it costs companies money because if one employee is out, the rest of the team must make up the work. Those left behind lose productivity and often feel overworked. Seventy-eight percent of survey respondents say they cover absences by having co-workers “share the pain.” The firm may also hire a temporary worker – which also involves an added cost. And if there is a missed deadline, Luiz says, there is a business impact to that.

One way to mitigate cost, Luiz explains, is to cross-train employees so they can cover everybody’s expertise and also for companies to be accommodating, such as changing desk setups for injured employees or allowing them to work at home.