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Employers Cautious Toward Exchanges, Embracing CDHPs

By Stephen Miller, CEBS  10/25/2012
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U.S. employers say it will be mostly business as usual regarding their health care benefits in 2013, but they are planning more extensive design changes as the Patient Protection and Affordable Care Act (PPACA) is implemented fully, according to a survey by the nonprofit Midwest Business Group on Health (MBGH) in collaboration with The Benfield Group, a health care consultancy.

The survey was conducted in August 2012 among self-insured (77 percent) and fully insured (23 percent) U.S. employers across a variety of industries. Employers ranged in size from large (29 percent with more than 5,000 employees), to midsize (38 percent with 1,001 to 5,000) and smaller (33 percent with less than 1,000).

Many to Adjust, Not Drop, Coverage

Among the key findings:

In preparation for the 40 percent excise tax on high cost “Cadillac” plans scheduled to take effect in 2018, 31 percent of employers indicated that they plan to reduce their benefits in 2014-2016, with 41 percent responding they will do so for 2017-2018.

For the next few years, there is little indication that employers plan to drop health care coverage and give employees money to buy health care coverage elsewhere.

Only 9 percent of employers indicated that they planned to participate in state health insurance exchanges when they begin in 2014-2016. While there is interest in private health insurance exchanges, at this time only 4 percent believe they will use these for active employee coverage in 2014-2016, while 11 percent indicated that they will move toward private exchanges to subsidize Medicare supplemental coverage for post-65 retirees.

With regard to the ongoing shift toward high-deductible, account-based consumer-directed health plans (CDHPs):

More than half (57 percent) of employers now offer CDHPs with health savings accounts (HSAs) or health reimbursement arrangements (HRAs) as a plan option. That number will increase to 62 percent in 2013 and 71 percent through 2018.

More than a quarter (29 percent) of all employers will make CDHPs the only plans available to employees by 2018.

All large employers (more than 5,000 employees) indicated that they will offer CDHPs by 2018, and 42 percent will make CDHPs their only plans by 2018.

More than half (52 percent) of employers plan to make vision and/or dental coverage voluntary benefits in 2013, increasing to 55 percent by 2017-2018.

Overall Employer Approaches to Health Benefits



2013 (planned)

2014-16 (planned)

2017-18 (planned)

Offer consumer-directed health plans (CDHP) with a health savings account (HSA) or health reimbursement arrangement (HRA) as a plan option.





Reduce benefit offerings to avoid 2018 40% excise tax on high-cost “Cadillac” plans.





Make vision and/or dental coverage voluntary benefits.





Replace all benefit options with one or more account-based plans (HSA or HRA).





Change their definition of part-time employment.





Cap employer contributions.





Change to premium contribution unit pricing (premiums increase incrementally based on number of people on the plan).





Adopt a salary-based premium contribution strategy.





Source: MBGH and The Benfield Group LLC

“Employers still believe that health benefits are vital to attract talented employees and maintain a productive workforce,” said Scott Thompson, president of the healthcare practice at The Benfield Group. The research found that most employers, especially those with more than 200 employees, will not drop employee benefit coverage in the foreseeable future; “instead, they’ll control costs in other ways like implementing CDHPs, basing premium contributions on the number of dependents covered (unit pricing) and reducing benefits to avoid the Cadillac tax,” he noted.

To obtain the full results of the August 2012 health care survey, e-mail MBGH (

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

Related External Article:

Will Employers Really Flock to PPACA Exchanges?, Treasury & Risk, October 2012

Related SHRM Articles:

Open Enrollment: Help Employees Make Better Health Care Choices, SHRM Online Benefits, October 2012

6.3% Health Premium Increases Projected for 2013, SHRM Online Benefits, October 2012

How to Choose Health Insurance Exchanges, HR Magazine, October 2012

Employers Reconsider Retiree Medical Strategies, SHRM Online Benefits, October 2012

Consumer-Driven Plans Are Now Second Most Common Design, SHRM Online Benefits, September 2012

Rand Study: CDHPs Could Save Billions in Spending, SHRM Online Benefits Discipline, May 2012

Are Health Premium Tiers a Good Idea?, SHRM Online Benefits Discipline, January 2012

Quick Links:

SHRM Online Benefits Page

SHRM Online Health Care Reform Resource Page

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