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Employers Consider Their Health Care Reform Options
Survey looks at dependent eligibility and retiree coverage, high-deductible health plans and other reform provisions

By Stephen Miller  6/24/2010

Employers are attempting to assess the impact of U.S. health care reform legislation how they will respond. A new survey by the not-for-profit International Foundation of Employee Benefit Plans, Health Care Reform: What Employers Are Considering, examines how more than 1,000 U.S. employers, representing over 7 million people, are reacting to the legislation and the strategies they are implementing in their organizations.

“Both large and small employers are carefully scrutinizing their options,” says Sally Natchek, senior director of research at the International Foundation. “Employers at this point are reacting to the first wave of requirements, knowing they need to make some initial immediate decisions. They are also looking at the next few years and how the timeline of regulations will impact their organizations. In the midst of a host of health care reform challenges, employers remain confident that they will continue to offer health care benefits to their active employees.”

Key survey findings follow below.

Only one in five U.S. employers plans to extend health care benefits immediately to children up to age 26. Twenty percent of employers are taking immediate action to change eligibility requirements for employees’ adult children up to age 26. But the majority of employers (67 percent) report that they will not extend coverage to dependents up to age 26 until required by law in 2011; about 5 percent of respondents’ plans currently meet the new legal requirements, and 9 percent are not sure.

Many employers, 42 percent, plan to extend dental plan coverage to adult children in order to match their medical plan requirements, and 32 percent plan to extend vision benefits to adult children. Once again, many employers (53 percent) are not yet sure which action they will take.

A large majority of employers, 75 percent, identify extending coverage to adult children until age 26 as the major reform requirement impacting plan costs.

Half of employers intend to apply for the early retiree reinsurance program. The survey found that just over half (52 percent) of employers who offer medical benefits to retirees plan to take advantage of the one-time federal reinsurance program established by health care reform legislation. Many (35 percent) have not yet decided whether they will apply; just 13 percent have decided not to apply.

Approximately three in five employers (61 percent) offering medical benefits to retirees plan to review their health plan benefit strategies for early retirees (55-64 years old) in the 12 months following the survey. Half of the respondents offering retiree coverage intend to examine their strategies relating to retirees who are 65 and older.

“Even before health care reform, employers offering benefits to retirees experienced increased financial strain in the form of an aging population and escalating health care costs,” explains Natchek. “New requirements such as eliminating the federal income tax deduction for the subsidy that employers receive for maintaining drug coverage for Medicare-eligible retirees could increase the likelihood that employers will take a fresh look at their medical strategy for retirees.”

Other Key Findings

Among other highlights from the survey:

Eighty-seven percent of employers agree that their organizations will continue to offer health care benefits because they are critical to employee recruitment and retention and to remaining competitive.

Of employers whose plans include lifetime maximum provisions on essential benefits, only 4 percent are removing lifetime maximums before they are required to do so, 86 percent are not making changes until required, and 10 percent are not sure. Likewise, 4 percent of employers offering plans with annual maximums are removing them before they are required to do so, 84 percent are not making changes until required and 12 percent are not sure.

One in five employers (21 percent) is planning to add or increase emphasis on high-deductible health plans in the 12 months following the survey. Close to 70 percent of these employers are likely to focus on account-based plans linked to health savings accounts.

Close to half of respondents (48 percent) are focusing on redesigning their health plans so that by 2018 their plans will avoid triggering the excise or “Cadillac” tax for high-value plans.

Sixty-six percent of employers agree that their organizations will take advantage of the new legislative provision that will offer increased levels of financial incentives available to employees who participate in employer-provided wellness programs; 9 percent disagree, and 25 percent are not sure.

Employers are planning to communicate with and educate their employees on the new legislation through e-mails to participants (51 percent), special written communication pieces (49 percent) and their organization’s web site (42 percent). Only one-third of employers (37 percent) have already communicated with employees; almost half (42 percent) are planning communication efforts for annual enrollment.

Survey results include responses from 1,021 individuals representing single-employer plans (including corporations) in the databases of the International Foundation of Employee Benefit Plans and the not-for-profit International Society of Certified Employee Benefit Specialists in May 2010. Companies ranged in size from small employers with fewer than 500 employees to large companies with more than 20,000 employees.

Stephen Miller is an online editor/manager for SHRM.

Related Articles:

Increased Health Care Cost Shifting Expected in 2011, SHRM Online Benefits Discipline, June 2010

Most Employers Not Providing Early Coverage for Adult Children, SHRM Online Benefits Discipline, June 2010

Early Retiree Reinsurance Fund Likely Will Be Exhausted in 2012, Study Finds, SHRM Online Benefits Discipline, June 2010

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