Healthcare Reform – Rising Costs of Benefits Puts Onus on Employees

Up to 159 million Americans (52 percent) are covered by employer-sponsored plans. The Affordable Care Act is changing the group health insurance scenario. Employers are concerned about the rising cost of per-employee benefit costs and are expecting their employees to contribute more out of their pay checks to the benefits package. This is borne out by the results of several studies, including ERC’s recently published 2011/2012 Policies & Benefits Survey covering Northeast Ohio employers.

Recent Deloitte and the International Society of Certified Employee Benefit Specialists (ISCEBS) research1 indicates that 85% of employers expect new health insurance law to raise per-employee benefit costs. Employees are expected to help employers face this challenge by paying more out of their pay checks to their benefits package. In fact, the focus on controlling healthcare costs is evident: 73% of the employers surveyed said that health care reform will push them to reevaluate their benefits packages over the next 12 months in light of health reform changes. Sixty-two per cent of employers have already made cost-sharing a part of their benefits packages.

Two-thirds of the Deloitte employer respondents are making no immediate changes to their benefit programs and adopting a "wait and see" approach for final healthcare reform provisions that may reduce plan design flexibility.

More controversial was the recent McKinsey & Company survey2 of 1,300 employers in early 2011 which found that 30% said they would “definitely or probably” stop offering employer coverage after 2014. Nearly half of the employers said they would consider alternatives to their current plans, including an insurance option that would only offer coverage only to certain employees.

A survey conducted by the Kaiser Commission on Medicaid and the Uninsured and the Urban Institute3 last year showed that in 2010, employees with coverage contributed a greater share of the total premium, a significant change from the steady share they paid on average over the last decade. In 2010, covered employees on average contributed 19% of the total premium for single coverage (up from 17% in 2009) and 30% for family coverage (up from 27% in 2009).

According to ERC’s 2011 survey, Northeast Ohio employers report that the average health insurance deductible paid by employees has risen significantly since 2009. As organizations strive to cope with the increase in costs, they are resorting to greater cost-sharing with employees. The survey indicates that employees' co-pay amounts and contribution to group health insurance premiums also increased in the last two years.

Competing objectives are complicating matters. Deloitte/ISCEBS rates employers’ top five total reward priorities as:

• Cost of healthcare benefits
• Employees’ willingness to share more of the benefit
• Ability of the benefits program to attract, motivate and retain talent
• Ability to comply with and adjust to PPACA's mandate
• Clear alignment of total reward strategy with business strategy and brand

Presenting the other side of the picture, the study lists the personal challenges that employees face as follows:

• 75 percent of the respondents ranked their ability to afford retirement, including post-retirement healthcare, in their top three personal challenges.
• 60 percent of employees ranked job security among their top three concerns.
• 48 percent of respondents plan to increase their level of contribution to qualified retirement plans

Educating employees on health plans, usage, costs and health prevention and wellness programs can help them make smarter decisions when it comes to cost-sharing and improving the flexibility of group health insurance plans .

References

1. 2011 Top Five Total Rewards Priorities

2. How US Health Care Reform Will Affect Employee Benefits

3. 2010 Kaiser/HRET Employer Health Benefits Survey