Consumerism, Cost-Shifting Helped Restrain Health Spending

Half of all organizations increased their employees’ share of health care costs last year

By Stephen Miller, CEBS Jan 30, 2015

HR professionals indicated that offering consumer-directed health plans was among the most successful strategies for controlling the costs of health care, along with increasing the employee share of total costs and offering a variety of preferred provider organization (PPO) plans.

These were among the key findings of the Society for Human Resource Management (SHRM) Strategic Benefits—Health Care survey report, posted online in January 2015. The survey was fielded in April-May 2014 to randomly selected SHRM members. Health care costs were defined as employer-paid premiums, administration costs and any individual medical claims covered by the employer.

Most employers in the U.S. continue to see their health care costs rising year after year, putting pressure on HR to continue to look for cost-savings. Over the last three years, more than two-thirds of respondents indicated their organization’s total health care costs increased compared with the previous plan year, the survey found.

Controlling Health Care Costs

For controlling the costs of health care, the most popular employer actions reported by HR professionals at organizations that provide health care coverage to their employees were:

Providing educational initiatives related to health and wellness (56 percent of respondents) or to lower-cost generic prescription drugs (48 percent).

Offering employee participation in preventive health and wellness initiatives (46 percent).

Creating an organizational culture that promotes health and wellness (45 percent).

Offering consumer-directed health plans—e.g., health savings accounts or health reimbursement arrangements (44 percent).

Providing incentives or rewards related to health and wellness (43 percent).

Offering a variety of PPO plans with a range of premiums based on high and low deductibles, co-pay amounts, and so on (40 percent).

Increasing the Increasing the employee share contributed to the total costs of health care (40 percent).

HR professionals at organizations that provide employee coverage cited the following as "the most successful activity" in terms of controlling the cost of health care:

Offering consumer-directed health plans (19 percent of respondents).

Increasing the Increasing the employee share contributed to total costs (17 percent).

Offering a variety of preferred provider organization (PPO) plans (16 percent).

Looking Ahead

One-half of respondents indicated their organization increased the employee share contributed to the total costs of health care in 2014 compared with the previous plan year. Looking ahead at plan year 2015, just over one-quarter of respondents (26 percent) reported that their organization planned to increase the employee share contributed to the total costs of health care; about one-half were unsure (51 percent).

Focusing on future plan years, about one-fifth of respondents (19 percent) from organizations currently paying the majority or an equal portion of health care costs indicated they think employees will start paying for the majority of health care costs in the next three to five years; one-third (33 percent) were not sure.

“Shifting health care costs to employees carries a risk of decreasing employee job satisfaction,” said Jennifer Schramm, manager of workforce trends and forecasting at SHRM. “In a healthier job market this could have real implications for attracting talent, causing some employers to rethink their cost-shifting strategies. In some cases, HR professionals may need to make a strong business case for continuing to invest in employee health care benefits despite the cost.”

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

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