Large U.S. employers—those with at least 1,000 workers—remain committed to providing active employees with health care benefits. But they are taking more aggressive actions to improve health care delivery and manage rising costs, according to a nationwide survey by consultancy Towers Watson and the nonprofit National Business Group on Health (NBGH).
The survey was completed by 583 large employers between November 2012 and January 2013. Respondents collectively employ 11.3 million full-time employees and have 8.5 million employees enrolled in their health care programs, equating to a collective $103 billion in total health care expenditures. The survey report, Reshaping Health Care: Best Performers Leading the Way, was released March 7, 2013, at the NBGH’s Business Health Agenda 2013 conference in Washington, D.C.
Among the survey’s findings:
- Large employers expect average total costs for active employees to reach $12,136 in 2013, up 5.1 percent from $11,457 last year—the lowest cost increase in 15 years.
- Despite the relatively moderate, stable cost increases of the past few years, workers contribute 42 percent more for health care than they did five years ago, while organizations are paying 32 percent more.
- Employees’ share of total health care expenses, 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 large U.S. employers plan to continue to raise the share of premiums that employees pay, the survey found.
Subsidies for retiree medical coverage have declined, too, with only 15 percent of large companies offering them to newly hired employees. However, with the opening of health care insurance exchanges in 2014, some businesses may find cost-effective alternatives for their retirees.
“We are in a game-changing period," said Ron Fontanetta, senior health care consultant for Towers Watson, at the NBGH conference.
“Employers are redefining their financial commitment to health care,” in part to avoid the potential payment of health care reform’s “Cadillac” excise tax on high-value plans, beginning in 2018, he noted. “Yet they are also mindful of a growing affordability gap for employees, as health care costs take their toll on take-home pay. To combat these challenges, we expect employers to take more aggressive action, using emerging strategies to improve delivery, cost management and employee accountability.”
Reshaping Health Care and Delivery
Over the next five years the vast majority (92 percent) of large employers expect at least modest change in health care, while nearly half expect a significant or transformative change. Among the trends revealed in the survey:
- Just under half (49 percent) of large employers expect more health care price transparency.
- 45 percent expect to see new access points for health care delivery, such as telemedicine, e-visits and data-enabled kiosks at worksites.
- 39 percent expect health care providers to be reimbursed based on improvements in quality, efficiency and health outcomes, in place of pay for service.
Large employers also are looking at new options such as public and private health care exchanges for active and retiree populations, Fontanetta said. Nearly 30 percent of large employers already are providing access to an exchange-based solution for retirees, 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 of large employers said that in the next five years it is not at all likely that their organization will direct active employees to an exchange without providing a subsidy to purchase health care; 60 percent said the same even with a subsidy.
Accountability and Engagement
Large employers expect the trend toward consumer-directed health plans to continue:
- Currently, 66 percent of respondents offer an account-based health plan (ABHP), such as a health savings account or a health reimbursement arrangement, and that number is expected to increase to 79 percent in 2014.
- Nearly 15 percent of respondents with an ABHP use a total-replacement ABHP as their sole health plan option, up from 7.6 percent in 2010.
- Over the same period, median enrollment in ABHPs nearly doubled, from 15 percent in 2010 to nearly 30 percent in 2013.
These enrollment patterns underlie a fundamental evolution in consumer-directed health plans as employers increasingly use them to embed incentives:
- Nearly two-thirds of respondents offer employees financial rewards to encourage their participation in health programs.
- 16 percent of large companies align their rewards/penalties with 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 expect to do so by 2014, up from 23 percent that used this strategy in 2012.
Best Practices Reduce Costs
“Companies recognize the need to create value-based benefit designs and develop a supportive workforce culture to engage employees,” said Fontanetta. "The best performers identified by the survey 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."
Several critical factors drive health plans to outperform their peers, Fontanetta said. For instance, best performers:
- Consolidated vendors, to improve delivery and coordination of health management programs, while also taking steps to encourage providers to invest in new technologies aimed at improving the coordination of care.
- Focused more on communication, leveraging popular technology like social media to help employees make smarter health care decisions and to make sure they have the best available information on health care providers.
- Put greater emphasis on transparency in provider prices as well as quality and results.
- Invested in case management, including outreach by health coaches, to more proactively and effectively manage their high-cost cases.
- Placed more responsibility on employees, tying financial incentives to measurable improvements in their health, and extended incentives to spouses.
- Implemented new payment methods to providers, placing greater responsibility on them to deliver high-quality, efficient care.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
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