Employees to Pay More Premium Dollars for Health Insurance

Employees can anticipate facing increased financial responsibility for their health-care benefits as the open enrollment period for 2012 draws near, according to a recent survey by Towers Watson, a global professional services company.

The survey shows employees will start to see health benefit costs rise because of increased premium contributions as opposed to a jump in copayments, deductibles and coinsurance theyve experienced in the past.

Nonetheless, the survey says 71% of companies remain committed to providing employee health-care benefits to active employees through 2014.

Senior consulting actuary Mark Olson at Towers Watson, which conducted the survey among 368 companies across a broad range of industries and business sizes and collectively employing six million employees, says this commitment constitutes an overall positive outlook for employees.

The majority of employers interviewed say health care will remain a core piece of their company benefits and are strategizing and implementing change now. According to Olson, employers are cost shifting, redesigning plans, consolidating choices and pushing wellness programs as ways to keep health-care affordable.

Get Started Now

The time for employers to act, or at least analyze their benefit situation, is now. Although data shows  health-care costs to employers will rise at a noticeably lower rate during 2012 compared with 2011 (5.9% versus 7.6%, respectively), 2012 will become a landmark year; 88% of employers surveyed say they are planning to take steps to rethink their current strategies and control costs, particularly as a result of the Patient Protection and Affordable Care Act.

Account-based plans will surge in popularity, with 57% of large employers expecting to offer these plans, according to the surve.  Employees migrating to account-based plans will see lower premiums but assume a greater share of costs in higher deductibles; the remainder of employees can expect only nominal point-of-care cost increases in 2012. Employees enrolling in account-based plans will also be required to pay more for brand-name drugs, and will have access to specialty drugs only with prior authorization and participation in other therapies.

We expect to see continued changes in the prescription drug arena, with employers encouraging even greater use of generics and implementing more rules around prior authorization of certain drugs, says Nadina Rosier, national pharmacy director at Towers Watson. She continued to say patients can expect a push for them to take advantage of several blockbuster drugs coming off patents in the coming months.  Employees may also find increased copayment differences between generics and brand-name drugs as employers seek to encourage patients to take advantage of several blockbuster drugs coming off patent in the coming months.

According to the survey, the average annual cost of medical and pharmacy coverage projected for 2012 is $11,204 per employee for active coverage. Roughly two-thirds of employers or about 66% will increase employees share of premium contributions for single-only coverage for 2012, and 73% will increase them for employees with dependent coverage.

Difficult Decisions

In fact, 46% of employers surveyed say they will increase employee share of premium single-only coverage by one to five percentage points and 20% will increase share of premium single-only coverage by five or more percentage points.

Another 32% say they will make no change.

Forty-four percent of employers survey will increase share of premium contributions for dependent coverage by one to five percentage points, while 29% say they will institute premiums of five or more percentage points. Spouses will be encouraged to secure coverage from their own workplace plans.

Only 26% say they will make no change.

Both pre- and post-65 retirees will not fare as well. More than half of employers (54%) that offer health care benefits plan to discontinue them for all retirees.

Cost Challenges

Admittedly, employer commitment to keep health care a key component of their value propositions is challenged by necessary employer efforts to contain costsnot the least of which is health care reforms excise tax, a 40% tax on the richest plans which is scheduled to trigger in 2018.

Then theres employee motivation, allegiance and productivity. Employers have to find alternate ways to engage employees with things like better performance bonuses, raises, learning and development offerings and more time off, all to compensate for the changes in health benefits, says Olson. Still, while this helps overall productivity gains, it does not reduce costs.

Another target date is 2014, the year in which state-based exchanges are scheduled to be fully operative.

According to the survey, 70% of employers are not confident health insurance exchanges will provide a viable alternative to employer-sponsored coverage for active employees in 2014 or 2015 as they are intended to be.

Their skepticism, says Olson, in large part hinges on the amount of work involved. Its a huge undertaking of resources and systems to collect and report information. Its also not employer expertise to make assessments regarding who is eligible for subsidies. Above all they have a short time frame to complete a relatively large undertaking.

The cost of the exchanges are also fueling doubt, adds Mark Cesarano, managing consultant at the Savitz Organization, noting a recent report that Massachusetts, the first state to adopt an exchange type model, has seen health- care costs rise significantly.

Some experts say plans offered through the Massachusetts health insurance exchange have few, if any, tools that the private sector uses to engage consumers as partners in managing health costs.

But the exchanges do offer benefits: consumers will be forced to pay more attention to their own health costs, says Dr. Mark Tompkins, associate professor of political science at the University of South Carolina and an expert on health policy. Reform in any form or the exchange makes costs clear and more rational.

Still, 20% of employers say they are undecided as to what they plan to do in 2014, and another 9% say they actually plan to discontinue offering coverage.

Wait and See

Despite these employer predictions, experts suggest that consumers would be wise to take a wait-and- see approach.

It would be terrible for employers to exit quickly before having a replacement system in place, says Tompkins. But its insane to ask employers what theyre going to be doing for employee compensation three years down the road, he says.

Most experts are skeptical about the idea that it [the health-care benefit] would just disappear, says Tompkins. Surveys tell us many things, and probably the least important is that the benefit will go away; more importantly, the system is not working well and needs to be fixed.

Cesarano offers a similar pragmatic tack for employers. I do have some employers saying that in 2014 theyll be dumping their plans. I tell them its too early to make a judgment. Lets just focus on the next renewal.