Over two-thirds (71%) of the respondent companies indicate that they will continue offering health care benefit coverage to their active employees through 2014. Among the remaining 29%, most are unsure about whether they will continue sponsorship or offset the loss of health care benefits (if they exit) with an equivalent salary increase. For retirees, more than half of employers (54%) that offer health care benefits plan to discontinue them for both pre-65 and post-65 retirees.
One of the driving forces behind significant health care design changes and cost shifting is health care reform. A majority of employers (53%) are confident that health care reform will be implemented within the anticipated timeline, but 70% of employers are skeptical that health insurance Exchanges will provide a viable alternative to employer-sponsored coverage for active employees in 2014 or 2015. On top of that uncertainty, 56% of employers believe that they will trigger the excise tax by 2018. Yet more than three-quarters believe that health care benefits will continue to be a key component of their overall employee value proposition beyond 2014.
“With so much still unknown regarding both the short- and long-term impact of health care reform, most employers will not make wholesale changes to employer-sponsored health plans in 2012,” said Ron Fontanetta, senior health care consulting leader at Towers Watson. “However, a small group of employers is driving more fundamental change in 2012 by using account-based platform designs, aggressively positioning incentives and rethinking subsidization levels.”
Specifically, between now and 2014, employers are planning or considering the following actions:
- Increase offering of account-based health plans (ABHP) (17% intend to add this plan design in 2013 or 2014, which would result in nearly three in four [74%] employers offering an ABHP)
- Use value-based benefit designs (49%)
- Increase use of preferred networks (58%)
Additionally, employers are considering further strategy changes in 2014 and 2015:
- Substantially reduce the health care benefit value of active employees (47%)
- Reduce employee health care contributions for lower-paid workers (57%)
2012 Health Care Costs: A Snapshot
The average reported annual cost of medical and pharmacy coverage is $11,204 per employee for active coverage. Roughly two-thirds of employers (66%) will increase employees’ share-of-premium contributions for single-only coverage for 2012, and 73% will increase them for employees with dependent coverage.
Cost shifting is expected to continue well beyond 2012. According to the survey, by 2013 or 2014, many employers are considering significantly reducing their subsidization of coverage for spouses and dependents (23%), and using spousal waivers and surcharges when other coverage is available (19%). Today, only 5% of employers have, or plan to encourage, performance-based payments to providers based on the health status of plan participants by 2012, but an additional 26% are considering the implementation of this strategy for 2013 or 2014.
“It is clear from our research that employers remain committed to providing employer-sponsored benefits for the foreseeable future,” said Randall Abbott, senior health care consulting leader at Towers Watson. “2012 will ultimately be a defining year— the year some employers head down a path of bold and decisive actions, while others will wait and see. Whether choosing to pay or play, employers will need a strategic view for the future.”
Other interesting data points emerging from the survey include:
- Seven out of 10 employers (70%) expect to lose grandfathered status by 2012.
- More than half (57%) of employers are considering rewarding or penalizing their employees based on biometric outcomes (versus 8% today).
- One in three employers (32%) don’t offer health care coverage to their part-time employees.
- More than four in 10 (44%) employers currently use or are considering using social media tools to impact employee health and well-being (versus 14% today), and 26% currently support or are considering supporting employee health management with the use of online games (versus 9% today).