Published on September 3, 2014

PERSONNEL MATTERS: Big employers scaling back health benefits

By Jerry Geisel, Crain News Service

WASHINGTON (Sept. 3, 2014) — Large employers are continuing to pare back the type of healthcare plans they offer to try to keep costs under control, according to a recent survey released by the National Business Group on Health (NBGH).

Next year, nearly one third—32 percent—of employers responding to the survey said consumer-driven health plans (CDHPs) will be the only plan design they offer to employees. That compares with 22 percent this year and is nearly triple the percentage of employers that offered only CDHPs in 2010.

“Employers are looking to put employees in the driver’s seat. They are moving to consumer-driven plans,” NBGH President and CEO Brian Marcotte said during a briefing on the Washington-based group’s survey, which was based on the responses of 136 large employers, most of whom have at least 10,000 employees.

With their high deductibles, CDHPs give employees a powerful financial incentive to use healthcare services more efficiently. At the same time, CDHPs appeal to employers because, due to their design, they are much less expensive to offer than more traditional plans, such as preferred provider organizations (PPO).

For example, a Mercer L.L.C. survey released last year found that the average cost of coverage through CDHPs was about 20 percent less per employee than PPO coverage.

That cost issue is important for another reason: a provision in the Patient Protection and Affordable Care Act that will impose, starting in 2018, a 40 percent excise tax on healthcare premiums exceeding $10,200 for individual coverage and $27,500 for family coverage.

Indeed, 57 percent of surveyed employers said they plan to implement or expand CDHPs to minimize the impact of the new excise tax.

Healthcare exchanges less interesting to employers

On the other hand, one of the hottest and most discussed issues in the group healthcare plan arena—private healthcare exchanges—is attracting only modest employer interest.

For example, just 2 percent of respondents said they shifted employee coverage to private exchanges this year, while 1 percent said such a shift is planned for 2015. Just over one-third of respondents, though, said they are considering such a move in 2016 or later.

A key reason for that low level of employer interest in shifting their coverage to exchanges, at least for now, is that employers are not yet convinced that exchanges will be more effective in controlling costs than the employers are. For example, just 11 percent of respondents said they are very confident that exchanges will control costs better than they are now are doing.

On the other hand, employers said private exchanges are appealing for other reasons. For example, 77 percent of employers said they are confident that exchanges will offer a greater choice of healthcare plans, while 51 percent said the exchanges will do a better job of complying with regulations.

The survey also found that healthcare plan cost increases will continue to be relatively modest. In 2015, employers project that costs after design changes will increase an average of 5 percent, unchanged from what employers expect in 2014.

This report appeared on the website of Crain’s Business Insurance magazine, a Chicago-based sister publication of Tire Business.

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