Benefits March 5, 2015

Employers Exploring New Health Care Delivery Options

More employers are considering private exchanges for health care benefits and the use of telemedicine.
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Employer confidence in private exchanges is increasing: 17% view private exchanges as a viable alternative for active full-time workers in 2016.

Towers Watson’s 2015 Emerging Trends in Health Care Survey finds employer confidence more than doubles to 37% by 2018.

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In addition, one-quarter of employers (26%) have extensively analyzed private exchanges, and 20% say they are more interested in adopting a private exchange today than they were a year ago. Companies that have completed extensive analysis of private exchanges (versus companies that have not) are twice as likely to find private exchanges a viable alternative in 2016.

Employers report that cost savings and administrative simplicity are key factors in prompting use of private exchanges. Finance will play a role in shifting to a private exchange model: More than half (53%) report that finance will influence the decision to move to a private exchange or continue to maintain traditional employer-managed health plans.

Employers surveyed also reported greater resolve to improve health outcomes per dollar spent, with two-thirds planning to use data extensively to evaluate plan performance and employee behavior changes in lifestyle and health management. In addition, the use of centers of excellence (either within health plans or via a separate network) and narrow networks are expected to triple over the next three years. The use of telemedicine services in place of in-person physician visits, when appropriate, will continue to be rapidly adopted, already expanding by more than one-third (35%) in 2015 over 2014. More than 80% of employers say they could be offering telemedicine services by 2018.

Over the next few years, more than 80% of employers will carefully evaluate specialty pharmacy programs and benefits embedded in their medical plans. More than six in ten employers (61%) report including coverage and utilization restrictions in their specialty pharmacy strategy today.

The 2015 Emerging Trends in Health Care Survey found that employers project health care costs to increase 4% in 2015 after plan changes, compared to the 4.5% employers predicted for 2014. Without plan changes, projections are for an increase of 5.2%. These modest increases are still more than double the current rate of inflation and are a primary factor driving employers’ affordability concerns as the 2018 excise tax in the Patient Protection and Affordable Care Act (ACA) approaches. Two in five employers that have done extensive modeling of their plans say they will trigger the excise tax in 2018. Two-thirds say the tax will have an impact on their health program strategies.

Among the cost-saving actions gaining traction among employers are changes to benefits for spouses and dependents. For example, the percentage of employers using spousal surcharges (when coverage is available elsewhere) is expected to nearly double, from 32% now, to 61% in three years. Half of respondents (53%) plan to significantly reduce subsidies for spouses and dependents by 2018. In addition, four in ten employers (41%) say they may adopt a defined contribution arrangement (capping employer contributions at a flat dollar amount) by 2018.

Two of the top five areas employers say will be the focus of their health care activities in 2016 link to employee engagement and accountability: developing or enhancing a workplace culture where employees are responsible for their health (66%), and adopting or expanding the use of financial incentives to encourage healthy behaviors (51%).

Among employers surveyed, the most popular tactics for boosting employee engagement in health care are:

  • Education and tools for better decision making: Nearly half of employers (48%) will place more emphasis on educating employees about how to select providers based on quality and cost information over the next two years. In 2016, 43% of employers will provide price and quality transparency tools to help employees make better consumer choices.
  • Mobile apps to deliver health messages: Today, 60% of employers deliver health and wellness messages through mobile apps and portals. That percentage will increase to 95% by 2018.
  • Account-based health plans (ABHPs) as the only plan option: While 17% of employers currently offer full-replacement ABHPs (high-deductible plans tied to tax-advantaged health savings accounts), the percentage may increase to nearly 50% by 2018.

Towers Watson surveyed 444 midsize to large U.S. employers representing 7.2 million employees in January for its 2015 Emerging Trends in Health Care Survey.

Data and Research March 5, 2015

Retirement Savings Sacrificed for College Costs

A study finds about half of parents are willing to delay retirement or dip into retirement savings to pay for children’s education.
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Forty-nine percent of parents polled for T. Rowe Price’s Family Financial Tradeoffs Survey agree with the statement “I’d be willing to delay my retirement to pay for my kids’ college education.”

In addition, 51% agree with the statement “I’d be willing to get a second or part-time job to pay for my kids’ college education,” and 53% of parents agree with the statement “I would rather dip into my retirement savings to pay for my kids’ college education than have them take on student loans.”

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But, it’s not only their children’s education for which they are sacrificing retirement; 44% of the parents who used student loans to pay their own college costs said these repayments have impacted their ability to save for retirement. The survey finds most respondents (58%) have dipped into retirement savings to pay for something else. The top item was debt (20%), followed by day-to-day living expenses (13%), children’s education (12%) and covering expenses while unemployed (12%).

Twenty-seven percent indicated they have cashed out a retirement account from a previous job. The most common reason given was that it was needed for day-to-day expenses (37%), followed by “I was young and didn’t know any better” (29%). Twenty-one percent put it toward student loans and college expenses.

More than half (52%) of survey respondents are willing to take on $25,000 or more in debt to pay for their children’s college education, with 23% willing to take on more than $75,000 and 9% saying they would borrow “whatever it takes.” Forty-seven percent are willing to let their kids take on monthly student loan payments of $300 or more, and 32% are willing to let their kids take on $500 or more, with 77% saying they are at least somewhat likely to help their kids pay off student loans.

T. Rowe Price found 45% of parents who are saving for their children’s college indicated that they are using a regular savings account to do so. Thirty-one percent said that they are using a 529 college savings plan account, but nearly as many (30%) said they are using 401(k)s to save for their children’s college. When asked why they weren’t using a 529 account to save for college, 28% said they do not know what it is.

Even though contributions to a 529 account can be withdrawn anytime for any reason, 25% cited lack of access as a reason for not saving in a 529 account. Additionally, 15% mistakenly thought that saving in a 529 account meant that they wouldn’t be able to get financial aid, and they cited this as a reason they were not using one.

Sixty-eight percent of Millennials (respondents between ages 21 and 34) report being overwhelmed by financial pressures, compared with 58% of Gen Xers (respondents between ages 35 and 50). Of the Millennials who used loans to pay for college, 70% of them think they took out too much debt to pay for college, compared with 55% of Gen Xers.

Parents of Millennials were twice as likely to tap retirement savings to cover college. Of the Millennials whose parents helped pay for their college, 18% indicated that their parents had taken money from a retirement savings account to cover their college costs. However, only 9% of Gen Xers whose parents helped cover college costs said the same.

Millennials are more inclined to follow their parents’ example: 62% of this generation would rather dip into retirement savings to pay for college than have their kids take on student loans, compared with 44% of Gen Xers. Additionally, 34% of Millennials indicated they are using a 401(k) plan to save for college, compared with 25% of Gen Xers.

Among all survey respondents, 49% agree with the statement “I don’t think I will ever retire.” Sixty-four percent of Millennials believe they are more likely to win the lottery than receive any money from Social Security, compared with 49% of Gen Xers.

Nearly half (49%) of Millennials report losing sleep worrying about how they will pay for retirement, compared with 37% of Gen Xers. Nearly two-thirds (65%) of Millennials have taken money from retirement savings to pay for something else, versus 51% of Gen Xers.

T. Rowe Price’s Family Financial Tradeoffs Survey was fielded between December 18 and December 29, with a sample size of 2,000 parents of children ages 15 and younger, including a 50/50 quota for gender and age groups (i.e., Millennials and Gen Xers). Full results may be downloaded from here.

 

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