Employers Have Opportunity To Implement Strategic Health Care Changes In Post-ACA World

As implementation of the Patient Protection and Affordable Care Act (ACA) continues in 2014, employers are confronting broader strategic considerations relating to health coverage for their employees, according to a recent report from PricewaterhouseCoopers (PwC). In December 2013, PwC convened several roundtables with employers to discuss health coverage in 2014 and beyond. In its report, The Future of Healthcare Benefits—Employers’ opportunity for strategic change in the new healthcare world, PwC provides highlights of these roundtables, and notes that employers are thinking about the Cadillac tax, private exchanges, and redesigning delivery systems.

Cadillac tax. Employers are increasingly concerned about the ACA’s excise tax on high-cost plans, also known as the Cadillac tax. In 2018, a 40 percent excise tax will be imposed on high-cost plans. According to PwC, this is particularly important to employers with a concentration of employees who (1) are older, (2) live in higher-cost metropolitan areas, and/or (3) have traditionally been offered very generous benefits.

Some of the strategies discussed by employers at the roundtables to reduce costs and therefore avoid the excise tax were:

• implementing a high-deductible benefit plan as a total replacement;

• shifting toward more completely voluntary employee-paid benefits;

• raising the bar on population health and integrated delivery strategies to bend the cost curve; and

• moving to greater choice, defined contribution, or private exchanges.

Private exchanges. The ACA created public health insurance exchanges. Now many consultants and third party administrators are offering employers the option of offering employees coverage through private exchanges. PwC noted that the discussions related to private exchanges were mixed, with some employers expressing strong interest in a “new way” to provide more benefits choice and support to their employees. Some of the key concerns of participants tended to relate to the likelihood of cost savings, strength of the value proposition, ability to control plan design and strategy over time, and the transparency and size of the embedded costs of the private exchanges. The immaturity of the market also was seen as a concern.

Roundtable discussions indicated that: (1) there was significant variation among the private exchanges so it is difficult to make statements about “private exchanges” in general; and (2) the private exchanges for active employees are still very new. However, all of the major carriers appear to be participating in some or all of the private exchanges and will figure out how to underwrite the business over time because this is going to be an insurance product distribution channel for them, according to PwC.

Some employers are very intrigued by and evaluating private exchanges as a way to provide employees with benefits tailored to meet their needs while limiting and/or controlling the costs of health care, making this strategy very attractive to leadership. Others are skeptical and want to make sure they understand how much control they would have over design, funding, etc., and better understand what is in it for the exchanges—how and how much are they getting paid.

Redesigning delivery systems. In the roundtable discussions, PwC found an increasing interest in the impact of delivery system reform on health benefits strategy. For instance, employers are increasingly looking at narrow or high-performance networks; expanding use of mid-level practitioners, telemedicine, and extended delivery; experimenting with internal concierge services to keep employees out of emergency rooms; providing more public information, transparency, and outreach to help drive employee behavior; and implementing public and private exchanges to accelerate implementation of delivery system benefit strategies. However, some employers felt more time is needed to better understand the financial impact of delivery system changes before making more aggressive delivery strategies.

For more information, visit http://www.pwc.com/en_US/us/hr-management/publications/assets/hr-perspectives-healthcare-roundtables.pdf.

Visit our News Library to read more news stories.