ACA Prompts Scaling Back of Medical Plans

A new study released jointly by HighRoads, a provider of benefits plan management and health care compliance services, and Corporate Executive Board (CEB), an executive consulting and advisory firm, finds that many employers are beginning to scale back their medical plan designs in an effort to avoid having to pay the ACA’s “Cadillac tax,” which takes effect in 2018.

The report, “2014 Medical Plan Trends,” also shows employees are facing an increased share of upfront costs for health care, as well as an increase in high-deductible plans, a greater number of plans with coinsurance charges, higher out-of-pocket maximums, and increases in emergency room copayments.

“The employer-sponsored medical plan landscape continues to shift in response to the ACA and, as a result, it’s more important than ever for employers to effectively communicate plan changes to their employees,” says Cynthia Weidner, vice president of client development for HighRoads, based in Burlington, Massachusetts.

Weidner adds, “It’s evident that companies are embracing typical health plan consumerism strategies that encourage a more thoughtful, cost-effective use of medical benefits by exposing plan participants to more of the upfront costs. With plan designs changing and the emergence of new options including both public and private exchanges, benefits management professionals should be armed with the information employees need to make informed decisions on plan choices and efficient benefits usage.”

In 2018, the ACA will impose a 40% excise tax on benefits if the value of the health insurance benefits exceeds the threshold for a plan that costs more than $10,200 for an individual and $27,500 for a family (indexed for inflation). The report shows that companies are starting to transform their benefits plans to prepare for this requirement in ways that include:

• Two-thirds of 2014 medical plans have individual, in-network out-of-pocket maximums (OOPMs) of $2,500 or more. This is up from 58% of plans in 2013, and 49% in 2012;
• Forty-two percent of plans charge coinsurance for office visits, up from 35% in 2013;
• Emergency room visit copayments have increased by roughly $3 per year since 2009, with a 2014 average of $113 per visit; and
• The percentage of plans with high deductibles grew by 2% in 2014, from 23% to 25%.

In addition to trends related to greater plan participant cost sharing, the report finds some positive trends that can be attributed to the ACA, including:

• More generous coverage for mental health. The average copay for an inpatient mental health visit dropped by 3% from 2013 to 2014; and
• Greater free preventive coverage. Nearly all 2014 plans cover 100% of patient costs for in-network cancer screenings, immunizations and other preventive services.

“Our research shows that the changing face of health care plan design will continue to evolve as employers work to meet ACA requirements while avoiding added tax penalties by 2018,” says Laura Arpin, associate director, Corporate Executive Board, based in Arlington, Virginia. “But, employers must recognize how these changes may be reflected in the health care behaviors of their plan participants.”

Arpin adds, “Without strategic communication processes in place on the best practices for utilizing health plan benefits, plan participants may be more apt to delay necessary care due to the uncertainty of its actual cost. By making sure plan participants have cost information, employers can reduce the likelihood of their employees and employee families delaying or rationing care by as much as 50%.”

Information on how to request a copy of the report can be found here.