With the cost of employer-provided health care benefits at large U.S. employers expected to rise another 7 percent in 2013, 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 nonprofit association of large U.S. employers.
The survey, based on responses from 82 of the nation’s largest corporations, was conducted in June 2012.
It revealed that:
• Employers expect their health care benefits costs will increase an average of 7 percent in 2013—the same as in 2012 but a smaller increase than employers experienced the previous three years.
• 60 percent expect to increase the percentage of the premium paid by employees in 2013, although most indicated that the increase would be by a small amount (less than 5 percent).
• 40 percent expect to increase in-network deductibles.
• 33 percent expect to increase out-of-network deductibles.
• 32 percent expect to increase out-of pocket maximums.
“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, at an Aug. 6, 2012, press conference in Washington, D.C. “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.”
As a result, “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,” Darling advised.
While many employers continue to adopt cost-sharing provisions, survey respondents now consider consumer-directed health plans (CDHPs) and wellness initiatives to be more effective at stemming costs than shifting costs to employees. According to the survey:
• 43 percent of respondents cited a CDHP as the most effective cost control tactic, followed by wellness programs (19 percent).
• Just 9 percent reported increased employee cost-sharing as the most effective tactic, whereas a year earlier cost shifting was cited as the most effective measure.
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 percent) use incentives to encourage participation in programs, more employers are basing incentives on specific health outcomes:
• 44 percent provide an incentive based on tobacco-use status.
• 29 percent base awards on achievement of outcomes such as body-mass index (BMI) or cholesterol levels.
• Just under one-quarter of respondents (22 percent) take a different approach—applying surcharges to employees for not participating in certain programs.
The survey 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 percent from $300 in 2012 to $450 in 2013.
• The median incentive amount that dependents can earn is expected to increase from $250 to $375.
Changes Under Health Care Reform
Respondents were asked what changes they made or are planning to make as regulations from the Patient Protection and Affordable Care Act (PPACA) continue to come into effect. The survey found the following:
• Annual benefit limits. For plan years beginning on or after Jan. 1, 2014, group health plans may not establish annual dollar limits on essential health benefits. Annual limits may not be less than $2 million on or after Sept. 23, 2012, to Jan. 1, 2014. Half of all survey respondents indicated they no longer have any annual benefit limits in place. Among employers making changes for 2013, the most common benefits requiring adjustments to their annual limits were mental health and substance abuse (cited by 9 percent of respondents) and rehabilitative services and devices (also cited by 9 percent).
• Grandfather Status. A grandfathered health plan isn’t required to comply with some of the consumer protections of the PPACA that apply to other health plans that are not grandfathered. The majority of respondents (57 percent) no longer had any health plan options in grandfather status in 2012, compared to 49 percent in 2011.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Most Satisfied with Health Benefits Despite Higher Costs, SHRM Online Benefits Discipline, July 2012
Provider Networks, Premiums Drive Health Plan Choices, SHRM Online Benefits Discipline, July 2012
Study: Switch to CDHPs Cut Health Care Spending, SHRM Online Benefits Discipline, June 2012
SHRM Online Benefits DisciplineSHRM Online Health Care Reform Resource Page