Future of large-employer health benefit programs
17th Annual Towers Watson/National Business Group on Health
Employer Survey on Purchasing Value in Health Care
Towers Watson, 2012
Performance in an Era of Uncertainty
** Affordability issues are a growing challenge
Trends remain double the rate of inflation. Employees’ share of premium costs increased 9.3% between 2011 and 2012, with the dollar burden rising from $2,529 to $2,764. In fact, employees contribute nearly 40% more for health care than they did five years ago, compared with 34% for employers. Likewise, out-of-pocket expenses increased over the last year from 16% to 18%. That increase is partly due to subsidy shifts for dependents, as nearly half of companies increased employee contributions in tiers with dependent coverage. About a quarter of companies (24%) are using spousal surcharges, with another 13% planning to do so next year.
• The total employee cost share, including premiums and out-of-pocket costs, has climbed from 33.2% in 2011 to 34.4% in 2012.
** Employers confirm their commitment to providing health care benefits for active employees, but long-term confidence declines sharply
Many employers are steadfast in their commitment to their active health care benefits as a central component of their employee value proposition. Through 2015, most employers will remain focused on optimally managing the design and delivery of their programs, with a select number tailoring their designs to facilitate the availability of federal subsidies in the Exchanges for a portion of their workforce. Looking to the end of the coming decade, employers are much less confident that health care benefits will be offered at their organization.
• Only 3% of employers are somewhat or very likely to discontinue health care plans for active employees with no financial subsidy in 2014 or 2015.
• 45% are somewhat to very likely to offer an employer-sponsored health plan to only a portion of their population and direct ineligible employees to the Exchanges.
• Today, 23% of companies are very confident that they will continue to offer health care benefits for the next 10 years, down from a peak of 73% in 2007.
** Use of ABHPs is surging but must be part of a broader strategy to be effective
Account-based health plans (health savings accounts and health reimbursement arrangements) can be an important element in an organization’s health benefit management if the right incentives and employee education are attached. Today, 59% of companies have an ABHP in place, with another 11% expecting to add one by 2013. But ABHPs will not necessarily result in lower costs without significant enrollment. Our results show that employers that take a comprehensive approach to ABHPs (e.g., increasing employee and provider accountability while at the same time helping to cultivate smarter health care consumers) are the ones that have gained the greatest advantage. Using a health savings account (HSA) can also effectively align with an employer’s retirement strategy by providing employees with a tax-advantaged vehicle to pay for current costs while accumulating wealth for retirement.
• Total replacement ABHPs are also on the rise, representing nearly 12% of companies with an ABHP — up from to 7.6% in 2010.
• ABHP enrollment has nearly doubled in the last two years — surging from 15% in 2010 to 27% in 2012, and the move toward total replacement ABHPs is continuing.
• About 10% of respondents say employees and dependents enrolled in an ABHP are better at reducing lifestyle risks than those enrolled in non-ABHPs.
• Nearly four out of 10 companies currently consider their HSA for actives part of their retiree medical strategy, and another 20% are planning or considering such a strategy over the next three years.
Regardless of the future of health care reform, providing a cost-effective health benefit plan will remain a differentiator for many companies when it comes to attracting and retaining top talent.
By Don McCanne, MD
Health benefit programs of large employers have been the mainstay of health care coverage for working families. The Affordable Care Act relies heavily on the stability of these programs. However, only 23 percent of these employers are very confident that they will continue to offer health care benefits ten years from now.
Although this report discusses many observations and strategies for the future, one trend that is of concern is the greater reliance on high-deductible health plans with health savings accounts or health reimbursement arrangements (aka account-based health plans or ABHPs). Although these plans seem to be satisfactory for the healthy workforce and their young healthy families who really don't need much care, there remains the serious concern that such accounts deter patients with significant needs from receiving the care that they should have.
Quoting from this report, "An important question is whether ABHPs are having a positive or negative effect on employees’ utilization of health care services and ultimately on improving health outcomes. There are significant information gaps about health behaviors and outcomes for employees and dependents enrolled in an ABHP, compared with non-ABHPs."
The prevailing attitude seems to be that conditions in health care financing are so bad that we have to do something, no matter what. It doesn't seem to matter whether or not the changes are known to be beneficial, just so long as we don't enact a single payer system.
Everyone understands that a single payer system would work, but it's just not feasible. Not feasible? That's nonsense. We know that single payer would be highly beneficial, creating much greater value in health care spending. Enacting single payer is the only feasible approach we have.