ACA and Employers Changing the Health Benefits Landscape

The number of employers offering three or more health plans to employees has increased 28% over the past five years, according to the final results of the 2015 United Benefit Advisors (UBA) Health Plan Survey.

More and more, employers are offering expanded choices to employees either through private exchange solutions or by adding high-, medium-, and low-cost options; a trend UBA partners believe will continue to increase. Not only do employees get more options, but employers can introduce lower-cost plans that ultimately may boost enrollment and lower their costs.

Premium renewal rates (the comparison of similar plan rates year over year) increased an average of 6.2% for all plans—up from last year’s 5.6% increase. Last year, employers overwhelmingly utilized early renewal strategies to delay moving to higher-cost Affordable Care Act (ACA)-compliant plans and keep increases in check. However, these delay tactics ran out this year and, as a result, many of these same small groups moved to the higher-cost, community-rated ACA plans. As small groups lack negotiating power, they largely drove premiums up from last year.

The percentage of respondents’ grandfathered plans has fallen. Only 7.8% of plans are considered grandfathered plans compared to 8.2% in 2014. Grandfathering allowed an employer group to maintain a health plan that was in place prior to March 23, 2010, and be exempt from many changes required under the ACA. Typically, plans lose their grandfathered status by making changes that reduce benefits or increase the employee’s cost for benefits.

UBA notes that many employers are under the false assumption that the ACA’s excise tax on high-cost health plans (Cadillac tax) will apply only to the richest plans. However, the survey shows that’s not the case. By compounding the current premium increases over time, UBA can see that 30% of employers will be subject to the Cadillac tax in 2018, and by 2022, nearly three-quarters of employers will be subject to the tax.

Only 16.7% of respondents’ plans are considered “grandmothered.” Grandmothering provides small employers the option to maintain a pre-ACA health plan until 2016. Ultimately, they’re merely delaying the record increases associated with the transition to ACA-compliant plans, UBA says.

However, some small groups (with 51 to 100 employees) may avoid community rating and its associated rate increases, due to the Protecting Affordable Coverage for Employees (PACE) Act, which amends the ACA to keep the small employer definition of 50 or fewer employees and allows states to move to 100 if they wish. But the timing of rate refiling processes and state legislature decisions could nevertheless cause disruptions to when this protection will be realized for this group. 

According to the survey, 18.9% of all employers offered comprehensive wellness programs, which is a 2.7% increase from last year. Of these employers, 75.3% included health risk assessments, 67.6% offered employee incentives for participation, 67.5% offered biometric screenings or physical exams, 50.8% included on-site or telephone coaching for high-risk employees, and 42.4% included seminars or workshops. Compared to 2014, the use of health risk assessments is down 6.2%, while use of biometric screening and physical exams are up 6.5% and seminars are up 5.2%.

Overall, 12.2% of all plans are self-funded, nearly an 11% increase from 2014. UBA partners believe that self-funding will be increasingly desirable to employers of all sizes in the coming years as a way to avoid various cost and compliance aspects of health care reform.

A copy of the 2015 UBA Health Plan Survey Executive Summary can be ordered at http://content.ubabenefits.com/2015-heath-plan-survey-exec-summary.