Employers Want to Continue Health Coverage—But Is Today’s Model Sustainable?

Business Wire –

June 4, 2012: Oliver Wyman Survey Suggests That Employer-Sponsored Insurance Won’t Fade Away, but Is on the Verge of a Major Transformation.

Even if the Supreme Court upholds the Affordable Care Act, an overwhelming majority of employers want to keep providing health benefits for their employees. But most feel the cost is unsustainable, and they display great interest in alternatives to traditional health insurance schemes. This was the key finding of a new survey of more than 1,300 employers and 700 employees conducted by the Health & Life Sciences practice of Oliver Wyman.

“Previous surveys focused on whether employers intend to drop coverage or not,” says Mindy Kairey, a partner at Oliver Wyman and leader of the project. “But the question is more complicated than that. We wanted to understand why employers make the choices they do and to understand which types of new solutions will satisfy their needs.” To accomplish that, the survey used scenario-based questions asking respondents to choose among multiple alternatives—including two alternatives to traditional insurance that are gaining currency in the marketplace: private healthcare exchanges and value-based networks.

Some key findings:

• Employers want to provide healthcare insurance to their employees. Only 8 percent are likely to drop employer-sponsored coverage. Fifty percent said they will continue to offer insurance but with major changes. The remaining 42 percent want to maintain the status quo.

• They realize that they may not be able to. Two-thirds of employers believe that the cost of providing health coverage is unsustainable at current rates of medical inflation. More than half would find it unsustainable even if medical inflation were cut by five percentage points.

• Employers are hungry for new solutions. When offered a private exchange alternative, 20 percent selected it even if no savings were involved, and an additional 60 percent said they would switch to save 10 percent on healthcare costs. When offered a value-based network alternative, 20 percent would switch even without savings and more than half would switch for 10 percent savings. Only 10 percent of employers said they would not consider either alternative. “Employers are very interested in alternatives to traditional insurance,” says Kairey. “And their demand will only increase given their desire to continue to provide coverage to their employees. Private-sector insurance could still be a major part of the U.S. healthcare system—if health plans can quickly start demonstrating real improvements in value.”

• Employees are willing to change. In a related study, we surveyed more than 700 individuals who currently receive their health coverage through employers. Almost two-thirds were less than satisfied with their current insurance arrangement and 90 percent said they were prepared to accept major changes if it saved them money.

“To me, our survey findings suggest that we’re on the verge of a massive shift in how healthcare coverage works,” says Kairey. “That’s important, because more than 70 percent of the Americans who have health insurance receive it through their employers. If employers start to move toward models that promote efficiency and value, we could start seeing a profound level of real reform.”

Source: The John & Rusty Report via www.calchoice.com