Employers remain committed to providing active employee health care benefits in the near future, according to findings from the annual Towers Watson/National Business Group on Health (NBGH) Employer Survey on Purchasing Value in Health Care, but are responding to changes influenced in part by health care reform with more aggressive actions to improve health care delivery and manage rising costs of care.
The 18th annual Towers Watson/NBGH survey, Reshaping Health Care: Best Performers Leading the Way, found that employers expect average total costs for active employees to reach $12,136 in 2013, up 5.1% from $11,457 in 2012 — the lowest cost increase in 15 years.
Despite the relatively moderate, stable cost increases of the last few years, employees contribute 42% more for health care than they did five years ago, compared to a 32% increase for employers. The total employee cost share, including premiums and out-of-pocket costs, has climbed from 34% in 2011 to 37% in 2013.
In the coming years, more than 80% of respondents plan to continue to raise the share of premiums paid by employees, including rethinking their subsidy strategy for dependents. Subsidies for retiree medical coverage have declined, too, with only 15% of companies offering them to newly hired employees today. However, with the opening of health care insurance exchanges in 2014, some employers may find cost-effective alternatives for their retirees.
"Employers are redefining their financial commitment to health care, in part to avoid the potential payment of an excise tax in 2018. Yet they are also mindful of a growing affordability gap for employees as health care costs take their toll on take-home pay," said Ron Fontanetta, senior health care consultant for Towers Watson. "To combat these challenges, we expect employers to take more aggressive action, using emerging strategies to improve delivery, cost management and employee accountability."
Reshaping Health Care and Delivery
Over the next five years, the vast majority (92%) of employers anticipate at least modest change in health care, while nearly half of employers expect a significant or transformative change.
More specifically, 49% expect more health care price transparency, and 45% expect to see new access points for health care delivery such as telemedicine, e-visits and data-enabled kiosks. And 39% are expecting providers to be reimbursed based on improvements in quality, efficiency and health outcomes.
Employers are also looking at new options such as exchanges for active employee and retiree populations.
Nearly 30% of employers are already facilitating access to an exchange-based solution for retirees in 2013, with another 36% planning to do so over the next three years.
The outlook for active employees is a bit different. Eighty-two percent said it is not at all likely that their organization will direct active employees to an exchange without a subsidy in the next five years, and 60% said the same, even with a subsidy.
"Now that the Supreme Court decision and 2012 elections are behind us, employers are moving forward with new supply-side strategies for the post-reform world," said Helen Darling, president of the National Business Group on Health. "While employers look to integrate the development of exchanges, new networks and vendor performance into their strategies, they must also keep their focus on employee accountability, engagement and health."
Accountability and Engagement
Currently, 66% of respondents offer an account-based health plan (ABHP), and that number is expected to increase to 79% in 2014.
Nearly 15% of respondents with an ABHP now use a total-replacement ABHP, up from 7.6% in 2010.
Over the same period, median enrollment in ABHPs nearly doubled, surging from 15% in 2010 to nearly 30% in 2013. These enrollment patterns underlie a fundamental evolution in ABHPs as employers increasingly use them to embed incentives and align with postretirement strategies.
Nearly two-thirds of respondents offer employees financial rewards to encourage participation in health programs, but tougher requirements are on the way.
Today, 16% of companies align their rewards/penalties to specific biometric targets (other than tobacco use), and another 31% are considering this strategy for 2014. There is also growing interest in expanding financial incentives to include spouses: 59% of respondents anticipate doing so by 2014, up from 23% that did so in 2012.
"Companies recognize the need to create value-based benefit designs and develop a supportive workforce culture to engage employees in their own well-being," said Fontanetta. "In fact, our study identifies a group of best-performing companies with much lower cost increases over the last four years than the median respondents. These companies have achieved critical success in cost reduction and improvements in workforce health and productivity. And they provide instructive lessons for other companies to follow."
The best performers had an average health care cost increase of 1.7% in 2012, less than half the median increase and roughly in line with the general inflation trend.
In 2013, this group took a number of significant steps to improve the efficiency of their health care programs. They:
- Consolidated vendors to improve delivery and coordination of health management programs, while also taking steps to incent providers to invest in new technologies to improve the coordination of care
- Focused more on communication to help employees make smarter health care decisions, leveraging popular culture technology like social media to make sure they have the best information on health care providers available
- Stepped up emphasis on transparency in provider prices as well as quality and results
- Invested in case management to more proactively and effectively manage their high-cost cases
- Placed more responsibility on employees, tying financial incentives to measurable improvements in their health, and extended incentives to spouses
- Started implementing new payment methods to providers, placing greater responsibility on them to deliver high-quality, efficient care
About the Survey
The 18th annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care tracks employers' strategies and practices, and the results of their efforts to provide and manage health benefits for their workforce. The survey was completed by 583 employers, between November 2012 and January 2013, and reflects respondents' 2012 and 2013 health program decisions and strategies and, in some cases, their 2014 plans. Respondents collectively employ 11.3 million full-time employees and have 8.5 million employees enrolled in their health care programs, equating to a collective $103 billion in total health care expenditures.
About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at towerswatson.com.