As more of the provisions of the Patient Protection and Affordable Care Act (PPACA), otherwise known as health care reform, are implemented or loom on the horizon, companies are starting to get a sense of what their health benefit plans and costs might be like in this emerging landscape.
First, some good news. The annual Towers Watson/National Business Group on Health (NBGH) Employer Survey on Purchasing Value in Health Care shows that employer health care costs for active employees increased 5.1%, the lowest rate in 15 years. Per-employee costs increased from $11,457 in 2012 to $12,136 for this year. The survey includes responses from 583 employers.
More costs to employees. At least part of this employer cost control has come at the expense of employees. The percentage of health costs borne by employees continues to increase, reaching 37% in 2013 compared to 34% in 2011, and employees are contributing 42% more to their health coverage than they did five years ago, compared to a 32% increase for employers in the same time period. This trend shows no sign of abating with more than 80% of companies continuing to increase the percentage of premiums paid by employees and rethinking their subsidy strategy for dependents.
Wait-and-see and adjust as needed. Meanwhile, a survey of more than 1,200 employers conducted by the Willis Human Capital Practice found that most employers are watching carefully to see what their peers and competitors are doing in response to health care reform changes. However, the surveyed employers are not necessarily looking to follow in those other companies’ footsteps. For example, although more than half of the surveyed employers expect competitors would shift additional costs of health care reform to employees, only one-third expect to do so themselves.
This finding is an interesting contrast to the Towers Watson/NBGH survey and it remains to be seen which version of cost shifting takes hold. It is difficult to see how it can become reality. For example, the Willis survey also found that the most prevalent strategy among these employers is to continue offering health coverage to employees that exceeds the “minimum essential coverage” requirement under the PPACA. Then, once companies have complied with that requirement, they will be looking for ways to adjust coverage and contributions to manage health benefit costs.
Health reform costs unclear to some but not all. One other important finding from the Willis survey is the fact that more than half of the companies surveyed have not done the necessary calculations to determine whether PPACA compliance has increased their costs. These companies could be in for an unpleasant surprise. Among those companies that have made this calculation, nearly two-thirds state that health care reform has increased their costs, and 17% of those companies said costs had increased by more than 5%.
How to achieve the lowest increase. Interestingly, the Towers Watson/NBGH survey identified action taken by the employer in the survey with the lowest cost increase (1.7%). This employer took a number of steps, including consolidating vendors to improve delivery and coordination of health management programs, communicating to help employees make smarter health care decisions, increased transparency in provider pricing, quality and results, and tied financial incentives for employees and their spouses to measurable health improvements.