Not as Simple as Paying or Playing

By Jenny Ivy

With roughly half of employers saying they’ll definitely be offering health coverage even after insurance exchanges begin, speculating with certainty (a bit of an oxymoron) that it’s only a matter of time before companies drop health coverage is a futile argument.

Likewise, it’s fair to say that there are several legitimate reasons for companies (particularly the bigger ones) to keep offering coverage, but we’re only assuming the status quo won’t change dramatically once health reform is in full effect. All you have to do is look at the numbers that are already dropping, and dropping hard. [See: Reform driving up health plan costs]

Studies, including the one released last week by Towers Watson and the National Business Group on Health, show there is a commitment among employers to do what they can to keep offering coverage in the near-term. Beyond 10 years, however, is when things get debatable. According to their employer survey, only 3 percent of employers are somewhat to very likely to discontinue health care plans for active employees in 2014 or 2015 without providing a financial subsidy. By the same measure, 45 percent of employers are somewhat to very likely to offer coverage to only a portion of their work force and direct the others to the exchanges.

While most employers will remain focused on sponsoring the design and delivery of their health care programs through 2015 (77 percent), they are much less confident that health care benefits will be offered at their organization over the longer term. Less than one in four (23 percent) companies are very confident they’ll continue to offer health care benefits 10 years from now, down from a peak of 73 percent in 2007.

Unless there’s a revolutionary way of delivering health insurance, employers will be circulating through all the options to combat high health care costs. The Towers Watson/NBGH survey shows health care costs per employee are expected to rise 5.9 percent this year, as compared to 5.4 percent in 2011. Health care costs per employee averaged $10,982 last year, and is expected to rise to $11,664 in 2012. Employees’ share of costs increased 9.3 percent during this period, to $2,764. This amount represents a 40 percent increase in costs from just five years ago, as compared to a 34 percent increase for employers over the same time period.

“As employers try to maintain the balance between containing costs and offering competitive total rewards packages, they are realizing that their future health care benefit choices are not quite as simple as ‘paying or playing,’” says Ron Fontanetta, senior health care consulting leader at Towers Watson. “In fact, there is a wide spectrum of design choices that will allow employers to develop a health care strategy that matches their unique objectives and workforce demographics.”

Besides actually cultivating healthier employees, the survey shows there are several emerging tactics they plan to use to control their costs:

  • Spousal and dependent coverage surcharges: Roughly half of the companies (47 percent) increased employee contributions in tiers with dependent coverage, and about a quarter (24 percent) are using spousal surcharges, with another 13% planning to do so next year.
  • Growth in Account-Based Health Plans (ABHPs): Nearly one in six companies (59 percent) are offering an ABHP today, and another 11 percent plan to do so by 2013. ABHP enrollment has nearly doubled in the last two years, from 15 percent in 2010 to 27 percent in 2012.
  • Changing pharmacy landscape: Six in 10 companies have added or expanded step therapy or prior authorization programs, and 21 percent reduced pharmacy copays last year for those using a generic with a chronic condition (with another 16 percent planning to add this feature in 2013).
  • Vendor management and transparency: Three in 10 companies (30 percent) have consolidated their health plan vendors in the past two years, and 11 percent plan to do so next year.

 

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