Employers expect changes to how they provide healthcare

Although most employers plan on still offering health insurance to their employees, a recent survey indicates they expect moderate changes in the coming year as they look to reduce costs.

According to the Employer Survey on Purchasing Value in Health Care, from the Towers Watson/National Business Group on Health, indicated employers are responding to changes influenced in part by health care reform with more aggressive actions to improve health care delivery and manage rising costs of care.

The survey found that employers expect average total costs for active employees to reach $12,136 in 2013, up 5.1 percent from $11,457 in 2012 — the lowest cost increase in 15 years.

Despite the relatively moderate, stable cost increases of the last few years, employees contribute 42 percent more for health care than they did five years ago, compared to a 32 percent increase for employers.

The total employee cost share, including premiums and out-of-pocket costs, has climbed from 34 percent in 2011 to 37 percent in 2013.

In the coming years, more than 80 percent of respondents plan to continue to raise the share of premiums paid by employees, including rethinking their subsidy strategy for dependents.

Subsidies for retiree medical coverage have declined, too, with only 15 percent of companies offering them to newly hired employees today. However, with the opening of health care insurance exchanges in 2014, some employers may find cost-effective alternatives for their retirees.

“Employers are redefining their financial commitment to health care, in part to avoid the potential payment of an excise tax in 2018. Yet they are also mindful of a growing affordability gap for employees as health care costs take their toll on take-home pay,” Ron Fontanetta, senior health care consultant for Towers Watson, said in a statement. “To combat these challenges, we expect employers to take more aggressive action, using emerging strategies to improve delivery, cost management and employee accountability.”

Over the next five years, the vast majority (92 percent) of employers anticipated at least modest change in health care, while nearly half of employers expected a significant or transformative change.

More specifically, 49 percent expect more health care price transparency and 45 percent expect to see new access points for health care delivery such as telemedicine, e-visits and data-enabled kiosks, while 39 percent are expecting providers to be reimbursed based on improvements in quality, efficiency and health outcomes.

Employers are also looking at new options such as exchanges for active employee and retiree populations. Nearly 30 percent of employers are already facilitating access to an exchange-based solution for retirees in 2013, with another 36 percent planning to do so over the next three years.

The outlook for active employees is a bit different. Eighty-two percent said it is not at all likely that their organization will direct active employees to an exchange without a subsidy in the next five years, and 60 percent said the same, even with a subsidy.

“Now that the Supreme Court decision and 2012 elections are behind us, employers are moving forward with new supply-side strategies for the post-reform world,” Helen Darling, president of the National Business Group on Health, said in a statement. “While employers look to integrate the development of exchanges, new networks and vendor performance into their strategies, they must also keep their focus on employee accountability, engagement and health.”

Currently, 66 percent of respondents offer an Account-Based Health Plan . That number is expected to increase to 79 percent in 2014. Nearly 15 percent of respondents with an ABHP now use a total-replacement ABHP, up from 7.6 percent in 2010.

Over the same period, median enrollment in ABHPs nearly doubled, surging from 15 percent in 2010 to nearly 30 percent in 2013. These enrollment patterns underlie a fundamental evolution in ABHPs as employers increasingly use them to embed incentives and align with postretirement strategies.

Nearly two-thirds of respondents offer employees financial rewards to encourage participation in health programs, but tougher requirements are on the way.

Today, 16 percent of companies align their rewards/penalties to specific biometric targets (other than tobacco use), and another 31 percent are considering this strategy for 2014. There is also growing interest in expanding financial incentives to include spouses: 59 percent of respondents anticipate doing so by 2014, up from 23 percent that did so in 2012.

“Companies recognize the need to create value-based benefit designs and develop a supportive workforce culture to engage employees in their own well-being,” Fontanetta said. “In fact, our study identifies a group of best-performing companies with much lower cost increases over the last four years than the median respondents. These companies have achieved critical success in cost reduction and improvements in workforce health and productivity. And they provide instructive lessons for other companies to follow.”

The best performers had an average health care cost increase of 1.7 percent in 2012, less than half the median increase and roughly in line with the general inflation trend. In 2013, this group took a number of significant steps to improve the efficiency of their health care programs. These include: