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Goodbye to Healthcare Benefits?

A recent survey finds about one-third of employers are unsure whether their organizations will offer healthcare benefits to employees in a decade. Indeed, as future elements of the healthcare-reform law kick in, HR and benefits professionals may need to totally rethink what it means to be an employer of choice at a time when employers do not offer healthcare benefits.

Wednesday, March 23, 2011
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A combination of factors -- a still-sluggish economy, rising healthcare costs and the projected impact of healthcare reform -- have already led many employers to take bold steps to overhaul the design of their current employee-healthcare plans.

If findings from the 16th annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care are any indication, that trend is likely to continue in the future -- to the point where they may not be offering healthcare benefits at all.

The survey, which polled HR managers and employee-benefits managers from 588 U.S. companies with 1,000-plus employees, found that only about one-third (38 percent) of respondents are confident their organizations will offer healthcare benefits directly to employees 10 years from now.

That percentage is notably lower than in past surveys conducted by the organizations, says Helen Darling, president and CEO of the Washington, D.C.-based National Business Group on Health, who attributes it to the current business and economic climate.

"[The survey findings] don't surprise me," Darling says. "The predominant feeling right now is one of uncertainty."

It is an uncertainty that is well-founded, says Randall Abbott, senior consultant and North American leader of health and group benefits at New York-based Towers Watson.

"This decline in confidence reflects the convergence of a slow economy, the outlook for continually rising healthcare costs, and the effects -- real and perceived -- of healthcare reform and its potential impact on business conditions," Abbott says.

"Given this uncertain environment, it's not surprising that employers are examining their alternatives while we wait for clarification of many of the details of healthcare reform," he says.

Historically, HR leaders have taken an incremental approach to plan-design modifications, Abbott says. The post-reform healthcare landscape, however, finds many employers considering sweeping changes to employee-health strategies, and seeking options that move costs outside their organizations.

With an eye on 2012 and beyond, the trend toward consumer-driven benefit plans -- which encourage employee engagement and accountability for costs -- is bound to continue, and HR professionals are likely to find "the health benefits picture to be very different in years ahead," says Dallas Salisbury, president and chief executive officer of the Washington-based Employee Benefit Research Institute.

Potentially shaping that picture are the opening of insurance exchanges in 2014, and a possible excise tax on healthcare benefits that is planned to go into effect in 2018.

The proposed insurance exchanges, which are designed to create more competition among providers and subsequently bring down the price of health insurance, would "simply facilitate change and accelerate the pace," Salisbury says.

"Most of the attributes of health insurance that could be achieved by employers -- but were not available in the individual market -- would now be available through exchanges," he says. "And, if and when the tax advantage of employment-based coverage goes away, the acceleration [of employers not offering healthcare benefits] will be even more pronounced."

Indeed, 70 percent of respondents to the Towers Watson/NBGH survey say the opening of insurance exchanges would have some effect on their active medical programs, and 78 percent say the exchanges would impact their retiree programs.

The implementation of the excise tax is expected to affect both active and retiree medical programs as well, with 24 percent and 20 percent of employers, respectively, anticipating an extensive impact on their benefit offerings.

 

These potentially significant changes due to healthcare reform will likely impact recruitment and retention efforts -- a scenario that HR professionals should prepare for, Darling says.

"Employers feel very strongly that a good benefits package is a competitive asset, and a competitive benefit," she says. "The recession notwithstanding, we still have a war for talent going on. A talent strategy is foremost in everyone's mind right now. [Employers] are trying to hang on to people with rare skills and talents."

The elimination of employer-provided benefits, Abbot says, would require HR leaders and benefits managers to shift their attention to "other elements of total rewards and potentially prompt an evaluation of which rewards programs result in increased levels of attraction, engagement and retention of talent."

"The elimination of healthcare benefits would likely result in an even more intense focus on workforce health and productivity, as well as focusing efforts more globally," he says.

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As a growing number of companies look to exchanges and other options to defray escalating costs and achieve compliance with new and pending healthcare regulations, an organization's commitment to the wellness of its workforce should remain the same, Darling says.

"With the evolution of healthcare benefits -- or at least the financial side of it -- and employers moving on to some other way of providing them, employers will focus on making sure their employees are healthy and productive," Darling says.

"The importance of ensuring that the organization's talent is healthy, productive, engaged and able to serve customers is not going to just go away," she says.

Even before these elements of the reform law become effective, organizations are continuing to refine their healthcare benefits, including redesigning plans to incorporate enhanced point-of-care consumerism, reposition incentives to improve employee engagement, redefine financial commitment to dependent and retiree coverage, and emphasize the use of high-value providers, the survey finds.

For instance, about two-thirds (68 percent) of respondents say their organizations are moving to increase employee contributions for any plans that include dependent coverage.

In addition, 19 percent say they are increasing employee contributions for each new dependent added to a plan, and about one-third (35 percent) of respondents say their organizations are using or planning to implement spousal waivers or surcharges.

One-third of respondents say their companies plan to reward or penalize employees based on biometric outcomes (such as for weight and cholesterol), compared with just 7 percent in 2011 and 6 percent in 2010.

About one-quarter of employers plan to cease employer sponsorship of retiree-medical coverage (26 percent) plan to convert a current subsidy to a retiree-health account (25 percent) or plan to eliminate employer-managed drug coverage for post-65 retirees and rely on Medicare Part D plans (23 percent).

Compared to years past, the survey also finds a significant increase in the adoption of account-based health plans. ABHPs are plans that have deductibles offered together with a personal account (such as a health-savings account or health-reimbursement arrangement) that can be used to pay a portion of the medical expenses that are not paid by the plan.

ABHPs typically include decision-support tools that help consumers better manage their health, healthcare and medical spending.

In 2002, the survey found just 2 percent of all employers offered ABHPs. By 2011, that number had ballooned to 53 percent, and another 13 percent say their organizations plan to add an ABHP by 2012.

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