Employees Will Continue to See Higher Cost Sharing

healthcare billingEmployees contribute 42% more for health care than they did five years ago, compared to a 32% increase for employers. In the coming years, more than 80% of employers that responded to a Towers Watson survey plan to raise the share of premiums paid by employees. That includes rethinking their subsidy strategy for dependents. Employers expect average total health care costs for active employees to reach $12,136 in 2013, up 5.1% from in 2012. That’s the lowest cost increase in 15 years, according to a Towers Watson survey. The total employee cost share, including premiums and out-of-pocket costs, has climbed from 34% in 2011 to 37% in 2013. Subsidies for retiree medical coverage have declined, too, with only 15% of companies offering them to newly hired employees.

Ron Fontanetta of Towers Watson said, “Employers are redefining their financial commitment to health care, in part, to avoid the potential payment of an excise tax in 2018. Yet they are also mindful of a growing affordability gap for employees as health care costs take their toll on take-home pay. To combat these challenges, we expect employers to take more aggressive action, using emerging strategies to improve delivery, cost management and employee accountability.”

Employers are looking at new options, such as exchanges for active employee and retiree populations. Nearly 30% of employers are already facilitating access to an exchange-based solution for retirees in 2013, with another 36% planning to do so over the next three years.

Eighty-two percent say that they are not likely to direct active employees to an exchange without a subsidy in the next five years. Sixty percent say the same, even with a subsidy. The survey also reveals the following:
• 66% offer an account-based health plan (ABHP); that number is expected to increase to 79% in 2014.
• Nearly 15% of those with an ABHP now use a total-replacement ABHP, up from 7.6% in 2010.
• Median enrollment in ABHPs nearly doubled, surging from 15% in 2010 to nearly 30% in 2013.

These enrollment patterns underlie a fundamental evolution in ABHPs as employers use them increasingly to offer incentives and align with post-retirement strategies. Nearly two-thirds of respondents offer financial rewards to encourage employee participation in health programs, but tougher requirements are on the way. Sixteen percent align their rewards and penalties to biometric targets (other than tobacco use), and another 31% are considering this strategy for 2014. There is growing interest in expanding financial incentives to include spouses: 59% anticipate doing so by 2014, up from 23% in 2012.
The study looked at why certain employers have seen much lower cost increases over the past four years. Fr the best performers, average health care cost increases only 1.7% in 2012, which is less than half the median increase and roughly in line with the general inflation trend. In 2013, best performers took the following steps:
• Consolidated vendors.
• Gave incentives to providers to invest in new technologies to improve care coordination.
• Helped employees make smarter health care decisions using popular communication methods such as social media.
• Put more emphasis on transparency of provider prices and quality.
• Invested in case management for high-cost cases.
• Tied financial incentives to measurable improvements in employees’ health, and extended incentives to spouses.
• Began implementing new payment methods to providers, giving them more responsibility for delivering high-quality, efficient care.
For more information, visit businessgrouphealth.org.

Last Updated 9/8/2017

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