Employer Actions Keeping Health Cost Increases Down

Health care benefit cost increases at large employers are expected to hold steady in 2016, due in large part to changes employers are making to their benefit programs.

Still, nearly half of large employers say if they do not take additional measures to control costs, at least one of their health plans will reach the threshold that triggers the “Cadillac” excise tax under the Patient Protection and Affordable Care Act (ACA) in 2018, according to an annual survey released by the National Business Group on Health.

Employers project their health care benefits costs will increase 6.0% in 2016, the same increase employers would have experienced this year had they made no changes to their plan design. However, many employers expect to keep increases to 5% for the third consecutive year by making plan changes, such as increasing cost-sharing provisions, adopting consumer-directed health plans, and expanding wellness initiatives. 

Nearly one-half of respondents (48%) expect at least one of their benefit plans will hit the excise tax threshold in 2018 if they do not take action. By 2020, nearly three-quarters (72%) expect one of their plans will trigger the tax, while their plan with the greatest enrollment will only be one year behind.  

Employers, however, are taking action to delay the impact of the excise tax. More than three-quarters of respondents (76%) are adding or expanding consumer-directed health plans (CDHPs) as well as consumerism tools, while 70% are expanding wellness programs.

Employers cited several factors driving rising costs. For many employers (43%), the number one driver of rising health care costs is high cost claimants. Respondents also cited three other cost drivers—the soaring costs of specialty pharmacy, specific diseases or conditions, and overall medical inflation.

NEXT: Changes employees may expect during open enrollment

Open enrollment season, when many employees will choose health benefits for 2016, is rapidly approaching. 

Based on the National Business Group on Health’s survey, during open enrollment, employees may expect:

• Small increases in premium contributions and deductibles: One in three employers will make small increases to the percentage of premiums employees pay for individual and family coverage. About one in four respondents will also make small increases to deductibles.
• More spousal surcharges: More than one in three employers (34%) will implement surcharges for spouses who can obtain coverage through their own employer, an increase from 29% this year. A handful of employers will exclude spouses altogether when other coverage is available through an employer.
• Growth in CDHPs levels off: Overall, 83% of employers will offer a CDHP in 2016, up from 81% this year.  In addition, one in three employers (33%) will only offer CDHPs to their employees in 2016. The vast majority (87%) of employers who offer CDHPs with a health savings account (HSA) will continue to make contributions to those to assist employees enrolled in CDHPs.
• Sharp increase in telehealth:  Nearly three in four respondents (74%) plan to offer telehealth to employees in states where it is legal, a sharp increase from 48% this year.
• Access to health care tools and resources: More than eight in 10 respondents (81%) plan to offer nurse coaching for care and condition management, while 73% will offer nurse coaching for lifestyle management. Nearly three in four respondents (73%) provide employees with self-service decision making tools to help them become better health care consumers.

 

NEXT: Employer views about private exchanges

While no employers plan to eliminate health care coverage and pay the penalty for not doing so, some employers continue to look at the viability of private exchanges. By 2016, 3% of respondents will have moved their active employees to a private exchange. Nearly one-quarter of respondents (24%) are considering a private exchange for active employees sometime in the future, but that is a decline from last year, when 35% were considering private exchanges. 

Contrary to the active population, the trend of employers partnering with a private exchange for retirees is growing. By 2016, nearly one-quarter of respondents (24%) will offer retirees coverage through a private exchange, versus just 10% in 2013.

Employers, however, continue to have mixed views about how private exchanges will perform, the NBGH says.  The three features that most employers are confident a private exchange would do better than they could were providing more choice of plans, complying with regulations and supporting a defined contribution approach. However, they are less confident in the ability of private exchanges to outperform employer efforts to control health care costs, assist employees with questions and problems, and engage employees in better health care decision-making.

“While we continue to see interest in private exchanges among large employers, there really hasn’t been much movement. Many of the models in the marketplace have yet to mature and so it’s not surprising that many employers are still taking a wait-and-see approach when it comes to private exchanges. Employers need to do their due diligence, ask questions, and study the options closely. The jury is still out as to whether a private exchange can manage costs and care more efficiently than what employers are currently doing on their own,” says Brian Marcotte, president and CEO of the NBGH.

The survey, based on responses from 140 of the nation’s largest corporations, was conducted in June, 2015.