Tops Trends in Employer Based Plans

Employers expect a 4% increase in 2015 health care costs for active employees, according to Towers Watson. If no health plan adjustments are made, employers project a 5.2% growth rate, putting absolute cost per person for health care benefits at an all-time high. Despite this cost trend, 83% of employers plan to continue subsidizing and managing health benefits for full-time and part-time active employees, according to a Towers Watson Health survey. However, employers are rethinking company subsidies for spouses and dependents.

Seventy-three percent of employers are concerned about triggering the tax excise tax based on their plans. Forty-three percent say that avoiding the tax is their top priority health care strategy in 2015. CEOs and CFOs are more engaged in health plan strategy discussions as a result of the excise tax and other provisions of the health care reform law.

Randall Abbott, senior consultant at Towers Watson said, “CFOs are now focused on a new gold standard: managing health cost increases to the Consumer Price Index. This requires acute attention to improving program performance.”

Eighty-one percent of employers plan moderate to significant changes to their health care plans over the next three years, up from 72% a year ago. One tactic is specialty pharmacy management. Companies project that the pharmacy-only cost trend will be 5.3% after plan changes (6% before changes). Employers will also embrace telemedicine. Another key tactic is new payment approaches that hold providers accountable for the cost and outcomes of an episode of care.

For 2016 and 2017, 48% of employers are considering tying incentives to health outcomes, compared to just 10% in 2015; 37% are considering offering plans with a higher level of benefits based on the use of high-performance or narrow networks of medical providers, compared to just 7% in 2015. Thirty-four percent are considering telemedicine, compared to 15% in 2015.

Thirty-three percent of employers are considering significantly reducing company subsidies for spouses and dependents; 10% have already implemented such reductions, and 9% intend to do so in 2015. In addition, 26% are considering spouse exclusions or surcharges if coverage is available elsewhere; 30% have that tactic in place now, and another 7% expect to add it in 2015. Employers are also examining caps on health care coverage subsidies for active employees, using defined contribution approaches, with 30% of employers considering them for 2016 and 2017, 13% having them in place and another 3% planning them for 2015.

Twenty-eight percent of employers have extensively evaluated private exchanges. Twenty-four percent say private exchanges could provide a viable alternative for their active full-time employees in 2016. The following are the top three factors that would cause employers to consider a private exchange for full-time active employees: 64% — a private exchange can deliver greater value; 34% — other companies in their industry are adopting private exchanges; and 26% — the employer is unable  to stay below the excise tax ceiling as 2018 approaches. Nearly all employers say they have no plan to stop offering health benefits and direct active employees to public exchanges. Seventy-seven percent are confident that public exchanges offer a viable alternative for their active full-time employees in 2015 or 2016.

Abbot said that the most effective employers are continually evaluating new strategies to improve health plan performance. Examples include a steady migration to consumer driven health plans (CDHPs), action-based incentives, value-based payment methods with health plan partners, and plan designs that drive efficiencies. Other options are technology-based solutions, such as telemedicine, fitness devices or trackers, and social media. Sixty percent of employers plan to look at data to gauge the performance of their health plan. Seventy-six percent are looking at encouraging greater physical activity among their employees by using technologies, such as mobile health applications, fitness wearables, and social media.

Full-replacement CDHPS could be in place at 50% of companies by 2017: 17% offer only a CDHP; 4% intend to do so in 2015, and another 28% are considering it for 2016 or 2017. For more information, visit towerswatson.com.

Last Updated 09/16/2020

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