August 6, 2012: With the cost of employer-provided health care benefits at large U.S. employers expected to rise another 7% next year, employers are eyeing a variety of cost-control measures including asking workers to pay a greater portion of premiums but also sharply boosting financial rewards to engage workers in healthy lifestyles, according to a new survey by the National Business Group on Health, a non-profit association of 342 large employers.
The survey — the industry’s first look at costs and plan design changes for 2013 — also found that employers are continuing to make adjustments to their benefit plans to comply with additional provisions of the health reform law.
According to the survey, employers expect that health care benefits costs will increase an average of 7% in 2013. That’s the same increase they projected for this year, but smaller than employers experienced the previous three years. Despite being able to “hold the line” on increases, six in ten employers (60%) plan to increase the percentage of the premium paid by employees in 2013, although the majority of those employers indicated that the increase would be by a small amount (less than 5%). Additionally, 40% plan to increase in-network deductibles while roughly one-third will increase out-of-network deductibles (33%) and out-of pocket maximums (32%). The survey, based on responses from 82 of the nation’s largest corporations, was conducted in June, 2012 prior to the Supreme Court’s announcement to uphold the health care reform law.
“Rising health care costs continue to plague employers at an alarming rate,” said Helen Darling, President and CEO of the National Business Group on Health. “Although cost increases have stabilized somewhat, they are still on a higher base from last year and are simply not sustainable, especially when our nation’s economy and workers’ wages are virtually flat and everybody is struggling.”
While many employers continue to adopt cost-sharing provisions, survey respondents now consider consumer-directed health plans (CDHP) and wellness initiatives to be more effective at stemming cost than shifting costs to employees. According to the survey, 43% cited a CDHP as the most effective cost control tactic followed by wellness programs (19%). Less than one in ten (9%) respondents reported increased employee cost-sharing as the most effective tactic. Last year, cost shifting was cited as the most effective measure.
Employers Embracing, Increasing Wellness Initiatives
The survey found that employers — in their efforts to engage employees in healthy behaviors and lifestyles — continue to experiment with and perfect the best ways to incorporate financial incentives into wellness programs.
While nearly half of respondents (48%) use incentives to encourage participation in programs, some employers are basing incentives on specific health outcomes. More than four in ten (44%) provide an incentive based upon tobacco-use status while three in ten (29%) base awards upon achievement of outcomes such as BMI or cholesterol levels. Just under one fourth of respondents (22%) take a different approach — applying surcharges to employees for not participating in certain programs.
The survey also reported that employers plan to sharply increase the incentive amount for maintaining a healthy lifestyle or participating in a wellness program. Among employers that offer incentives, the median amount employees can earn will jump 50% from $300 this year to $450 next year. The median incentive amount that dependents can earn is expected to increase from $250 this year to $375 in 2013.
Changes as a Result of Health Care Reform
Respondents were asked what changes they made or are planning to make as regulations from the Affordable Care Act continue to come into effect. The survey found the following:
• Annual Benefit Limits: Half of all respondents (50%) indicated they no longer have any annual benefit limits in place, while nearly one third (32%) reported that they did not make any changes to their annual limits this year. Among employers making changes for 2013, the most common benefits requiring adjustments to their annual limits were mental health and substance abuse (9%) and rehabilitative services and devices (9%).
• Grandfather Status: The majority of respondents (57%) did not have any benefit option in grandfather status this year, compared to 49% last year. However, more than one fourth (27%) will have at least one grandfathered health plan this year.
• Health Insurance Exchanges: More than half of respondents (51%) believe that some retirees might find state health insurance exchanges to be a viable option for health insurance. More than one third (38%) felt that COBRA plan participants might consider exchanges while 35% felt that part-time employees might consider exchanges.
“Despite keeping cost increases steady for next year, providing high quality, affordable health care remains a top priority for employers. HR leaders need to keep the pressure on to control health care cost increases, increase consumerism and individual accountability, use all of the tools and resources available to empower consumers to be wiser purchasers and support them to choose healthier lifestyles. At the same time they must continue to stay on top of the ever changing regulatory environment, and adapt the design of their health plans as necessary,” said Darling.
Source: John & Rusty Report via WordandBrown.com