Health Benefit Sponsors Focused on Compliance and Controlling Costs

There is high enrollment in employer-sponsored health plans, and the strategic importance of health care benefits as a recruitment and retention tool is alive and well, according to a survey from HANYS Benefit Services.

However, there are myriad challenges when it comes to offering and maintaining employee health care benefits. The 2016 Employee Benefits Survey found, on a scale of one to five, with one being the most important and five being the least important, controlling employee benefit costs had the highest rating average (1.71) cited by most (58%) of respondents as their number one strategic priority. Two other areas given significant importance include legislative and compliance regulations (3.75) and improving health and fitness of employees (3.90).

A number of tactics are being used or contemplated within the next two years to offset increased employee health insurance costs, several of which are almost equally prevalent. For example, the most popular tactic that respondents are implementing or plan to implement involves promoting health care consumerism (80%), followed closely by evaluating a disease management program (78%) and increasing the employee contribution (77%).

The pecking order differs slightly among respondents that are currently pursuing these solutions versus those that plan to do so over time. For example, most are now conducting a dependent eligibility audit (53%) or evaluating a disease management program (44%), whereas the leading implementation plans cited were promoting health care consumerism (40%) or increasing the employee contribution (38%).

The popularity of wellness programs certainly shows a direct correlation between the health and welfare of employees and cost of their care. If wellness helps reduce the risk of heart attack, stroke, diabetes, hypertension, and other serious conditions, then the hope is that it will result in fewer medical claims.

Most respondents said their organization offers a wellness program (74%), with a number of tactics used. And of that percentage, most offer financial incentives as a part of their wellness program (74%). The most popular methods included flu shots (87%), smoking cessation (79%), and a health risk assessment.

Among the financial incentives used, a reduction to the employee health care contribution (39%), wellness credit (28%) and contribution to a health savings account (13%) were top choices. In addition, several miscellaneous examples were cited. They include cash, a gift card, prizes, free medicine, or a contribution to a 403(b) retirement savings plan.

Health care reform is clearly driving benefit plan design changes and strategies. The leading methods being used or contemplated involve promoting health care through wellness and preventive services (96%), providing competitive but not excessive benefits (95%) and revising contribution strategies (82%).

The pecking order differs slightly among respondents that are currently pursuing these solutions versus those that plan to do so in the future. For example, most already provide competitive but not excessive benefits (80%) or promote health care through wellness and preventive services (69%), whereas the leading implementation plans cited were to revise a contribution strategy and to promote health care through wellness and preventive services (42% and 27%, respectively).

Regardless of which strategies are in use or about to be used, the respondents were confident about complying with Affordable Care Act (ACA)’s employer mandate. An overwhelming number (87%) said coverage meets the affordability standard without any adjustment to employer contributions.

Asked, for example, about the extent to which they are anticipating key ACA provisions that will be phased in or are already in place, 90% of the respondents said they are prepared, very prepared, or extremely prepared for complying with the affordability standard under the employer mandate. In addition, 84% said the same about employee disclosures, 69% said the same about 6055 and 6056 reporting, and 64% said the same about the 40% excise tax on so-called Cadillac coverage.

Efforts are under way or in the planning stages to avoid hefty penalties imposed on high-cost employer-sponsored health insurance targeted by the Cadillac tax. Of those who have taken action, the leading strategies cited were introducing a health savings account (HSA) or health reimbursement account (HRA) and introducing a high-deductible health plan (24% each). Asked whether they plan to implement Cadillac tax strategies, most said they would reduce benefits (26%), followed by introduce an HSA or HRA (20%) or introduce a high-deductible health plan (18%).

The survey found there are some potential trouble spots on compliance. One such area is 6055 and 6056 reporting mandates under ACA requiring employers to disclose certain coverage information to the Internal Revenue Service (IRS) and their employees. As many as 44% of the respondents said they did not have a good overall understanding of what should be reported, while 40% said they did not have easy access to relevant information. In addition, 18% reported that they did not have access to the information required to file those forms, and 36% referenced other challenges, which included concerns about data discrepancies or the level of assistance from brokers, insurance companies, third-party administrators, payroll companies, and other vendors.

Obstacles to success were not so much about confusion over these requirements as much as process issues and external factors, such as a lack of guidance as to what codes they should be using, which prevented completion of the reporting.

Based on comments from respondents, vendors did not adequately coordinate their efforts or take responsibility for errors made, and the outcome depended on whether the employer was fully insured or self-insured. For example, while insurance companies released documents to fully-insured health plan participants and did a portion of 6056 reporting, most data-gathering responsibilities fell on employer groups with more than 50 full-time employees that need to comply. HANYS suggests employers need to have clear communication with service providers or consultants about who will be responsible for these tasks.

At a time of increased government oversight, the vast majority of employers are turning to industry experts for guidance about regulatory and legislative compliance. This is particularly true for larger groups of more than 100 employees whose reporting requirements are more extensive or complex. Most of the survey respondents (62%) ranked employee benefit brokers and consultants as their top choice for such advice compared to human resources staff (25%) and legal avenues (12%)—both of which were nearly even among second and third choices. The findings suggest that hiring and retaining a trusted adviser will be a crucial path to success.

The survey report may be requested from here.