Employers Vague on Health Care Reform Costs

But they are still committed to providing health benefits

By Stephen Miller, CEBS Jun 10, 2014

Although health care reform is a top concern for U.S. employers, most organizations have not measured its cost impact, according to a survey report released by insurance broker Willis Human Capital Practice.

The Willis Health Care Reform Survey 2014 presents the findings of a poll conducted in January of more than 1,000 U.S. employers of varying sizes, industry sectors and geographies.

Only 37 percent of respondents have identified the cost impact of health care reform on their health plans in 2014. While this is an increase over the 28 percent of respondents that had identified these costs in the prior year’s survey, “it demonstrates that for many organizations, determining an accurate assessment of these figures is still a challenge,” the report states.

Of the respondents that have identified a cost impact of health care reform:

  • Over half (54 percent) noted Over half (54 percent) noted a cost increase under 5 percent attributable to the Affordable Care Act.
  • Under a quarter (22 percent) estimated an increase in the 5 percent to 10 percent range.

Meanwhile, group medical costs for employers continue to rise. Nearly three-quarters (74 percent) of respondents indicated that their health plan costs increased in 2014. Understanding how much of that increase is due to changes in compliance vs. other factors, such as the overall medical cost trend, is crucial to their strategic planning, according to the report.

Staying the Course

Despite some highly visible reports in the media to the contrary, employers generally do not plan to eliminate group medical benefits as part of their compensation practices, the survey results indicated. Sixty percent of respondents said they were extremely unlikely to “move away from benefit engagement,” and another 17 percent said they were somewhat unlikely to do so.

Other key findings of the survey include the following:

  • Cost-shifting is only part of the solution to rising costs. The majority of respondents experienced an increase in their health plan costs from 2013 to 2014, but of those who reported a cost increase, almost a quarter kept employee contributions the same.
  • Dependent coverage contributions are being increased.Increasing dependent coverage contributions is reported by 15 percent of respondents, and another 26 percent plan to implement this strategy over the next three years. Twelve percent of respondents have added a surcharge or eliminated coverage for spouses who have coverage through their own employer.
  • Coverage has been reduced for some part-time employees. Fourteen percent of respondents have eliminated coverage for part-time employees in 2014, and another 8 percent plan to do so moving forward.
  • Wellness programs are being used to help control rising group medical costs. Nearly one-third (32 percent) of respondents have implemented or plan to expand existing wellness programs for this purpose.
  • The use of private health insurance exchanges is being considered by a surprising number of employers (although actual adoption is still quite low). Twenty percent of respondents are considering private exchanges. The opportunity to control costs through a defined contribution approach while providing greater choice to their workforce is an attractive strategy for many organizations, the survey indicated.

“The surprising finding is that few employers actually know how expensive compliance with health care reform has been or will be for their organizations,” said Jay Kirschbaum, practice leader of the Willis Human Capital Practice’s National Legal and Research Group. “Without that knowledge, employers may not be able to accurately assess the impact and determine the optimal way to proceed with their plans.”

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.

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