Employers keep health care cost increases at bay with changes to benefit programs

Health care benefit cost increases at large employers are expected to hold steady in 2016, due in large part to changes employers are making to their benefit programs. At the same time, nearly half of large employers say if they don’t take additional measures to control costs, at least one of their health plans will reach the threshold that triggers the “Cadillac tax” under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) in 2018, according to an annual survey by the National Business Group on Health.

“The need to control rising health care benefits costs has never been greater,” said Brian Marcotte, president and CEO of the National Business Group on Health. “Rising costs have plagued employers for many years, and now the looming excise tax is adding pressure. Employers only have two more years to bend the cost curve before the excise tax goes into effect in 2018. And while employers are pursuing several strategies to keep their plans under the excise tax threshold, they estimate their actions will only delay the impact by two to three years.”

According to the survey, employers project their health care benefits costs will increase 6 percent in 2016, the same increase employers would have experienced this year had they made no changes to their plan design. However, many employers expect to keep increases to 5 percent for the third consecutive year by making plan changes, such as increasing cost-sharing provisions, adopting consumer-directed health plans (CDHPs), and expanding wellness initiatives.

Cadillac tax. Almost one-half of respondents (48%) expect at least one of their benefit plans will hit the excise tax threshold in 2018 if they don’t take action. By 2020, almost three-quarters (72%) expect one of their plans will trigger the tax, while their plan with the greatest enrollment will only be one year behind. Employers, however, are taking action to delay the impact of the excise tax. More than three quarters of respondents (76%) are adding or expanding CDHPs and consumerism tools while 70 percent are expanding wellness programs.

Private exchanges. While no employers in the survey plan to eliminate health care coverage and pay the penalty for not doing so, some employers continue to look at the viability of private exchanges. By 2016, 3 percent of respondents will have moved their active employees to a private exchange. Nearly a quarter of respondents (24%) are considering a private exchange for active employees sometime in the future, but that is a decline from last year, when 35 percent were considering private exchanges. Contrary to the active population, the trend of employers partnering with a private exchange for retirees is growing. By 2016, nearly a quarter of respondents (24%) will offer retirees coverage through a private exchange versus just 10 percent in 2013.

Employers, however, continue to have mixed views on how private exchanges will perform. The three features that most employers are confident a private exchange would do better than they could were providing more choice of plans, complying with regulations and supporting a defined contribution approach. However, they are less confident in the ability of private exchanges to outperform employer efforts to control health care costs, assist employees with questions and problems, and engage employees in better health care decision-making.

“While we continue to see interest in private exchanges among large employers, there really hasn’t been much movement. Many of the models in the marketplace have yet to mature and so it’s not surprising that many employers are still taking a wait and see approach when it comes to private exchanges. Employers need to do their due diligence, ask questions, and study the options closely. The jury is still out as to whether a private exchange can manage costs and care more efficiently than what employers are currently doing on their own,” Marcotte said.

SOURCE: www.businessgrouphealth.org/pressroom/pressRelease.cfm?ID=263.

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