How will company health care offerings change in future?
Obesity will continue to contribute to rise in costs
It’s no secret that rising health care costs are putting the squeeze on U.S. employers. Despite this, a new survey by Aon Hewitt has found that 94 percent of them plan to continue offering health benefits to their workers – at least for the next three to five years.
However, the survey of of nearly 800 large and mid-size companies found big changes ahead in the way businesses will approach health benefits.
Costs will continue to go up
The amount employers spend on health care has increased by 40 percent in the past six years to approximately $8,800 per employee. Over this same period, employee premium and out-of-pocket costs have increased 64 percent to almost $5,000 per year. Aon Hewitt estimates that health care costs will continue to rise 8 percent to 9 percent per year for the foreseeable future.
Obesity, smoking and failure to comply with medications, are expected to continue to significantly contribute to costs.
Traditional approach losing ground
Almost two-thirds of the employees who participated in the survey revealed plans to move away from a traditional "managed trend" approach to one that requires participants to take a more active role in their health care planning.
"The health care marketplace is becoming increasingly complex. New models of delivery, new approaches to managing health, and new compliance requirements are challenging employers to think differently about their role in 'owning' health insurance responsibilities for employees and their dependents," said John Zern, executive vice president and the Americas Health & Benefits practice director for Aon Hewitt. "Employers are staying in the game, but they are taking bold and assertive steps to achieve more effective results—and they are doing so at a faster pace than we've seen in prior years."
A “Pay for Performance” model
During the next three-to-five years, almost 40 percent of employers expect to adopt a "house money/house rules" approach, in which they reserve a portion of their health care dollars for those employees who exhibit good health behaviors or who can show measurable progress toward their health goals. For example, participants who take health risk questionnaires and biometric screenings may be rewarded in the form of lower premiums or access to broader health coverage.
Other employers may waive prescription drug co-pays if an employee demonstrates they are following their doctor's orders with regard to a chronic condition. Lastly, some leading-edge employers are working with health plans to incentivize participants to use a small provider network of high quality, cost-efficient providers.
Private health care exchanges
While still an emerging trend, private health care exchanges are quickly generating interest among employers. In this model, employers continue to financially support health insurance, but enable employees to choose from multiple plan options and insurance carriers via a competitive, fully insured health insurance marketplace. The exchange model assumes many of the health benefits responsibilities that employers historically manage—including plan design, insurance carrier selection and management, user experience and behind-the-scenes administration.
Aon Hewitt’s Jim Winkler said exchanges will encourage greater efficiency among insurance companies.
About 28 percent of companies plan to move into a private health care exchange over the next three-to-five years.
Opting out altogether
The vast majority of employers do not view the emerging individual insurance market as a replacement for the employer-based system in place today. Just 6 percent of employers said they plan to exit health care completely in the next three-to-five years.
"The allure of exiting completely is strong until you look at the numbers," said Winkler. "Between the Affordable Care Act penalties for failing to offer coverage and the ensuing talent flight risk, most employers believe they need to continue to play a role in employee health, but want a different and better outcome."
Aon Hewitt is a global leader in human resource solutions.