Employers Expect To Make Modifications To Health Care Strategy Due To ACA

The majority of employers anticipate making moderate to significant changes to their health benefits programs for all employees and retirees by the beginning of 2016, due to the Patient Protection and Affordable Care Act (ACA), according to recent research from Towers Watson. However, the 2013 Health Care Changes Ahead Survey found that while employers remain concerned about a predicted 5.2 percent increase in 2014 health care costs and the risk of triggering the excise tax in 2018, 82 percent continue to view subsidized health care benefits as an important part of their employee value proposition in 2014.

Employers remain committed to sponsoring health care benefits, and 98 percent plan to retain their active medical plans for 2014 and 2015. However, Towers Watson found that they will look to private exchanges as a potential delivery channel. Nearly three-quarters (74 percent) of companies reported that as they evaluate private exchanges for active full-time employees, they will want evidence that private options deliver greater value than the current self-managed model. The survey did find that there is a disparity in how employers view public and private exchanges. Nearly 30 percent of employers have confidence in public health insurance exchanges as a viable alternative to employer-sponsored coverage in 2015. In contrast, private exchanges are more appealing, with 58 percent having confidence in them as a viable alternative.

Excise tax. The ACA will impose an excise tax of 40 percent on insurers of employer-sponsored health plans, including self-insured employers, with an aggregate value of more than $10,200 for individual coverage and $27,500 for family coverage. Towers Watson found that more than 60 percent of employers believe that they will trigger the excise tax in 2018 if they do not make adjustments to their current benefit strategy. Nearly the same percentage also said that the excise tax will have a moderate or significant influence on their strategy.

To combat the increase in employee health care costs and avoid the excise tax, nearly 40 percent of employers will be changing their plan designs for 2014. In addition to emphasizing employee wellness and health improvement approaches, employers are looking to increase their use of supply-side strategies and aggressive vendor management techniques. For 2015 or 2016, employers are considering providing outcome-based incentives (49 percent), offering a benefit differential for use of high-performance networks (47 percent), and using value-based benefit designs (40 percent), the survey noted.

Retiree and part-time coverage. According to Towers Watson, the percentage of employers that are somewhat or very likely to discontinue their employer-sponsored plan for post-65 retirees will grow from 25 percent in 2014 to 44 percent in 2015. And with the advent of public exchanges making new solutions available for pre-65 retirees, the percentage of employers that are somewhat or very likely to discontinue their plan for pre-65 retirees will rise from 10 percent in 2014 to 38 percent in 2015.

Less change is expected for part-time employees, the survey found. Only 11 percent are considering changes to their total rewards mix or design for part-time employees. Many part-time employees are likely to seek coverage through public exchanges.

The survey contains responses from 420 midsize and large employers. For more information, visit http://www.towerswatson.com/en/Press/2013/08/Health-Care-Reform-Heightens-Employers-Strategic-Plans-for-Health-Care-Benefits.

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