By DAN REYNOLDS, senior editor of Risk & Insurance®
When it comes to managing rising healthcare benefits costs, employers are getting more aggressive in shifting that cost to their employees. The incremental changes that marked their attempts in the past just won't cut it anymore, according to survey findings released by the Towers Watson and the National Business Group on Health.
One reason for the aggressive stance is that the rise in healthcare costs is unrelenting. Total anticipated annual costs per active employee, according to Towers Watson, are expected to reach $11,176 in 2011, a 7.6 percent increase over 2010, according to the study authors.
That increase is being fueled, in part, by reforms in the Patient Protection and Affordable Care Act, which was signed into law last year. The law is adding administrative and other costs on employers who offer coverage to their employees, employee benefits experts said.
Testifying on March 10 before the U.S. House Committee on Education and the Workforce, J. Michael Brewer, the Kansas City-based president of the Lockton Benefit Group, said companies that were already seeing a 10 percent annual increase in healthcare costs could expect to see an additional 2.5 percent tacked on as a result of the reforms signed into law last year by President Barack Obama.
But everyone is going to be paying more in the future, whether they are in a plan at work or out on their own.
In cases where plans are terminated and employees in 2014 move from group health plans to individual coverage on insurance exchanges called for by the reforms, those employees can plan on paying more than double--anywhere from 101 percent to 155 percent--more for coverage, according to the Lockton testimony.
In general, Brewer's testimony took Congress to task for adding more cost and more labor to a system that is already costly and laborious.
"Our clients tell us they have no quarrel with the notion that improvements in the health insurance system are necessary, to improve access to insurance and reduce the cost of healthcare and concomitantly, the cost of health insurance," Brewer told the committee.
"However, they are frustrated that in the effort to achieve those aims the health reform law adds additional expense to their health insurance costs and imposes additional administrative burdens on them," Brewer said.
Proponents of the healthcare reforms said that as 30 million to 40 million uninsured Americans come into the system and are forced to buy healthcare coverage, the costs of coverage would be spread out over a greater number of people. Opponents said the law didn't do enough to control costs.
One place that employers will be cutting costs if they haven't already is in the area of dependent coverage.
According to the Towers Watson survey, 68 percent of employers are moving to increase contributions for dependents, and 26 percent of employers plan to cease sponsorship of retiree medical coverage.
Mark Olson, a Boston-based Towers Watson senior consulting actuary, said employers are eying the creation of the exchanges as places to transition out of the burden of providing coverage, with post-retirement coverage one of the focal points for the transition.
"A lot of the employers that we work with are looking at the population and seeing who is more likely to go to the exchanges and get coverage," Olson said.
Olson also said that there are employers that are ahead of the pack in their willingness to engage employees in wellness programs, hold them accountable for their health and be more consistent in communicating their expectations for better employee health.
"There are some employers that we have been tracking for a number of years that we call consistent performers, and there are certain interventions that they have done that have allowed them to experience lower rates of increase than other employers," Olson said.
March 21, 2011
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