Progressive deterioration in health plans offered by major employers
Survey for the National Business Group on Health
Towers Watson, March 6, 2014
The cost of providing employer-sponsored health care benefits is expected to increase 4.4% this year, a slight uptick from last year, when cost increases fell to a 15-year low, according to an annual survey by global professional services company Towers Watson and the National Business Group on Health (NBGH), an association of large employers.
The 19th Annual Towers Watson/NBGH Employer Survey on Purchasing Value in Health Care found that employer costs are expected to reach $9,560 per employee in 2014, an increase of 4.4% from $9,157 in 2013 (DM - but it would have been a 7.0% increase had employers not made changes to their plans that shifted more costs to their employees). The survey found the employees' share of premiums increased nearly 7%, to $2,975, this year. Out-of-pocket costs also increased. The total employee cost share has climbed from 34.4% in 2011 to 37% in 2014. Employees now pay over $100 more each month for health care compared with just three years ago.
"Despite the moderation, health care costs continue to outpace inflation and remain a major concern for U.S. employers given the challenging macroeconomic environment," said Ron Fontanetta, senior health care consultant for Towers Watson. "To find more effective ways to manage health costs, many employers are focusing on reshaping their health strategy for the next three to five years."
Indeed, while the vast majority (95%) of respondents indicate that subsidizing health care coverage for active employees is a very important part of their rewards package, almost as many (92%) expect to make moderate to significant changes to their programs by 2018.
Contribution strategy for spouses changing: Nearly half (49%) of employers have increased employee contributions for dependent tiers at higher rates than for individuals. Another 19% expect to make this move next year. Only 56% of companies believe that subsidized health care for spouses will be very important for 2015 and beyond — down from over 70% today, an indication that the trend toward increased cost sharing for spouses will likely continue.
More employers embracing account-based health plans (e.g., HSAs): Nearly three-quarters of respondents currently offer these plans, with another 9% expecting to add one for the first time in 2015. Nearly one-third of all companies could offer ABHPs as their only option by 2015 if they follow through with current plans.
Employers looking at exchange options: Two-thirds of companies believe that private exchanges will offer a viable alternative to employer-sponsored coverage for active employees as early as 2015.
Retiree health: Nearly two-thirds of employers that offer access to a sponsored plan today say they are likely to eliminate those programs in the next few years and steer their pre-Medicare-age population to public exchanges.
Health and financial subsidies: Twenty-two percent of companies adopted outcomes-based incentives (other than for tobacco), and that figure could reach 46% by 2015 if companies follow through with their plans.
Value purchasing: The best-performing respondents are addressing key drivers of performance including pharmacy management, network delivery options and enhanced wellness strategies.
By Don McCanne, M.D.
The most important reason that a more effective model of social insurance, such as single payer, was rejected in favor of a fragmented model of reform based on private health plans and public programs was that a majority of Americans were receiving their coverage through their employment and that was perceived as a segment of the market that was working well and should not be disrupted. “If you like the insurance you have, you can keep it.”
Not only was three-fifths of the population already covered by employer-sponsored plans, if this coverage were abandoned, the policy community working on reform would have had to devise a way of replacing the funds paying for this coverage - decisions that would likely provoke even greater public hostility than we saw with the enactment of the Affordable Care Act.
In the last half century, the best coverage has been provided mostly through large employers - those represented by the National Business Group on Health (employers with over 1,000 employees each and 55 million employees in total). These employers have been very concerned about rising health care costs, and now they know that they will have to live with our highly flawed version of comprehensive reform - the Affordable Care Act. They see very little in this Act that will provide them relief, so they are moving forward with their own measures.
We can now see where employers have been, where they have taken us, and where they are headed - on a downward spiral of ever inferior employer-sponsored health plans.
Some of the changes we are seeing, according to this and other reports:
* Higher deductibles (shifting costs to those with health care needs)
* Health savings accounts (not much help when they are underfunded or empty)
* Increasing employees’ share of premiums
* Reducing dependent coverage, especially spouses
* Sending employees to private insurance exchanges (shifting to defined contribution)
* Using narrower provider networks (taking away health care choices)
* Using outcome-based incentives that effectively penalize those with health problems
* Dumping retirees into public exchanges
* Using value purchasing - a code term for managed care
How could employers be so crass as to dump on their employees like this? Quite simple. They now have a new standard to point to - the low actuarial value private plans that are being offered through the government exchanges - plans that are using many of of the same strategies that will be harming the physical and financial health of plan enrollees. In fact, two-thirds of employers believe that “private exchanges will offer a viable alternative to employer-sponsored coverage for active employees as early as 2015” - next year! These private exchanges will offer plans using the same devious measures that will shift more costs to patients, thereby impairing access.
Our observation of this rapid deterioration in plans offered by the nation’s largest employers should cause us to sound the alarms. We need to begin immediately preparation for transition into a single payer national health program - an improved Medicare that covers all of us. The Fortune 500 employers are not going to do it for us.