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Employers Foresee Big Health Benefit Changes Over 3-5 Years
Plan designs are rewarding cost-savvy choices

By Stephen Miller, CEBS  2/24/2014
 

Most U.S. employers plan to continue sponsoring health benefits for active employees and retirees but expect to change the way those benefits are managed and delivered in the coming years, according to research from Aon Hewitt.

The consultancy's latest Health Care Survey of more than 1,230 employers reveals that a growing number plan to move away from traditional cost-trend mitigation approaches, which attempt to rein in health spending through vendor management and cost-shifting to employees.

Almost 40 percent of organizations expect to migrate toward a “house money/house rules” approach, which provides employees with financial incentives to make cost-conscious care-selection decisions and promotes wellness initiatives that improve health and reduce spending.

Employers’ Current and Future Health Strategies
for Active Employees

 

Now

3-5 Years

Maintain traditional cost-trend mitigation approaches

52%

21%

Manage risk via “house money/house rules” approach

40%

36%

Move to a private health exchange

5%

33%

Exit health care completely

1%

5%

Source: Aon Hewitt

Engaging Employees

“Traditional cost-management tactics don't address foundational issues in health care, including worsening population health,” Jim Winkler, Aon Hewitt’s chief innovation officer for health and benefits, told SHRM Online in an e-mail. In contrast, “Employers following a 'house money, house rules' path are using a variety of strategies to actively engage participants in their own health," he noted, including:

    • Using plan designs that reward cost-savvy choices (use of generic drugs vs. brand, use of primary care vs. specialist or emergency rooms).

    • Encouraging participants to get information about the costs of various options when seeking care.

    • Encouraging workers to know their own health risks, typically by providing biometric screenings.

    • Providing incentives for employees to select health facilities rated as centers of excellence and to participate in wellness and disease-management programs, sometimes as a requirement to select lower-cost design options.

"Employers want to create an environment that says, effectively, if you fully engage in understanding and improving your health, and use the health care system wisely, you will find this to be a generous benefit plan," Winkler explained. "And if you choose not to engage, you will find it to be expensive and restrictive."

Altering Provider-Payment Methods

Winkler also pointed to employers shifting away from "misaligned provider-payment methodologies.” For instance, he noted that providers paid on a fee-for-service basis "are not financially motivated to improve health and support wellness but, rather, have an incentive to perform more frequent and more complex care that pays better."

Companies are seeking to change that dynamic, he said, "either by empowering health plans via an insured exchange or by working through third parties like Catalyst for Payment Reform to change how we pay for health care."

Part-Timers

Despite being able to direct part-time employees to purchase health coverage through the Affordable Care Act's public health exchanges, few organizations plan to do so in the near future, the survey showed. Almost two-thirds intend to continue offering the same level of benefits to both part-time employees and full-timers, with or without an employer subsidy.

Just 38 percent expect to offer no benefits to part-time workers in the next three to five years.

Pre-65 Retirees

In Aon Hewitt’s latest Retiree Health Care survey of 424 employers, 20 percent favored moving all or a portion of their pre-65 retiree population to the individual market via public exchanges to purchase coverage in the next three to five years. Today, just 3 percent of employers do so.

“Employers will be moving at least some portion of their pre-65 retiree populations to state and federal exchanges, but they are waiting for these marketplaces to become more robust, competitive and mature,” said John Grosso, leader of Aon Hewitt’s retiree health care task force. “This movement will be slow and methodical as the public marketplaces evolve and as employers understand the implications of the 2018 excise tax, which will only impact group-based health insurance plans.”

Post-65 Retirees

The number of businesses offering subsidized retiree health benefits has slowly declined over the past decade, with just 25 percent of large employers doing so today, compared with approximately 50 percent in 2004.

Of those companies that offer health benefits to post-65 retirees, a growing number now provide, or are seriously considering providing, health benefits coverage through individual "Medigap" plans that supplement Medicare, or private Medicare Advantage plans that replace traditional Medicare coverage. Aon Hewitt found that 30 percent of companies have already sourced retiree health benefits through the individual market, most through a multicarrier private health exchange. Of the respondents contemplating future changes to their post-65 retiree strategies, two-thirds are considering this approach.

“A growing number of employers are leveraging multicarrier private exchanges for Medicare beneficiaries because they see the value in both the competitive mix of plans offered and the Medicare-specific navigation and advocacy offered by these private exchanges,” said Grosso.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

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