Survey Finds Most Employers Will Continue to Offer Health Care Benefits, But Make Plan Changes

A recent survey of 466 large and midsize companies has found that the projected increase in health care costs have caused a number of these businesses to revaluate and revise their health care offerings in order to comply with the Patient Protection and Affordable Care Act (“Affordable Care Act”) and minimize projected expenses. The survey, conducted by consulting firm Towers Watson, estimates that employer health costs for active employees will increase 8.2 % after plan changes, resulting in an average annual cost of $10,730 per employee by the year 2011. While most (94%) of those surveyed reported that they will continue to offer employer-sponsored health coverage for active employees, 59% claimed that they plan to implement “significant or moderate health care plan design changes” in 2011, a figure that will rise to 67% by the year 2012, in order to mitigate the rise in costs. Although the majority of employers are focusing their efforts on complying with provisions of the new health care bill, a large number of those surveyed (43%) consider making amendments to their long-term benefits strategy a priority for next year. The majority of those surveyed (55%) acknowledge that their planned plan changes will result in a forfeiture of their plans’ grandfathered status by 2011. By the year 2013, 85% of responding employers estimate that their plans will lose grandfathered status.

Such planned health care revisions include the following:

• By 2012, 64% of employers surveyed plan to offer an Account-Based Health Plan (ABHP) to their employees. An ABHP is a high deductible health plan coupled with some form of savings account, such as a Health Savings Account (HSA) or Health Reimbursement Account (HRA). According to the survey, 39% of respondents intend to maintain an ABHP enrollment of more than 20%.
• Increase employee premium health care contributions.
• Shift from incentives for employee participation in wellness programs to incentives for improvements in health metrics. The survey reports that 62% of employers intend to apply outcome-based incentives by 2012. The survey also projects that 40% of responding employers plan to use social networks and other channels to communicate about employee health and well-being. It bears noting that outcome-based incentive programs – in addition to other types of employee wellness programs – and use of social networks may raise issues under the privacy provisions of the Health Insurance Portability and Accounting Act of 1996 (HIPAA), state privacy laws, the Americans with Disabilities Act (ADA), the Genetic Information Nondiscrimination Act (GINA), and other federal and state statutes and regulations. Moreover, depending on how they are classified, any wellness plan incentives could be considered as part of an employee’s gross income subject to taxation.

According to Randall Abbott, a senior health care consultant with Towers Watson, “[i]n light of the complexities around all of the regulatory guidelines and mandates, most employers are taking the time to understand the new legal environment before making too many long-term changes to their health benefit strategy.” This is certainly wise given the potential impact of a number of federal and state statutes on some of the contemplated changes.

This entry was written by Ilyse Schuman.

Photo credit: Andriy Solovyov