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Changes on the Healthcare Horizon

Tuesday, May 1, 2012
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Although the rate of healthcare-cost increases is expected to remain somewhat stable this year, employers say they are taking more aggressive steps to manage their rising costs and improve employee health.

Total healthcare costs per employee are expected to rise 5.9 percent this year, compared to 5.4 percent in 2011, with dollar-figure amounts increasing from $10,982 last year to $11,664 this year, according to the 2012 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care.

The survey of 512 employers also finds that employees' share of costs have increased 9.3 percent in that same time span -- representing a 40-percent hike in costs from just five years ago. That compares to a 34-percent increase for employers over those five years.

Many employers plan to make substantial changes to their healthcare-benefit offerings over the next several years, according to the survey.

Four in 10 say developing a workforce culture in which employees are accountable for their own health is a top healthcare-strategy focus for 2013. And one in four says the same about reviewing their overall mix of benefits. Many are also keeping their eyes on staying up-to-date and complying with the Patient Protection and Affordable Care Act.

"As employers try to maintain the balance between containing costs and offering competitive total-reward packages," says Ron Fontanetta, senior healthcare consulting leader at New York-based Towers Watson, "they are realizing that their future healthcare-benefit choices are not quite as simple as 'paying or playing.' "

Another survey of more than 2,300 U.S. employers by Willis Human Capital Practice draws a more direct parallel between the PPACA and higher costs for some employers' group health plans.

According to that study, Health Care Reform Survey Overview, compliance with the law is already driving up costs -- and a majority of employers expect to pass along those price increases to employees.

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More than half of the employers (56 percent) say the law will increase overall costs, but only about one-quarter say they have actually quantified the cost of compliance within their health plans.

Of those employers, three in 20 (15 percent) say the law will increase costs between 2 percent and 5 percent, and about the same say it will rise more than 5 percent.

"Now that the healthcare-reform act has entered the implementation phase, the costs and benefits associated with the act are coming into greater focus for employers," says Jay Kirschbaum, practice leader for the national legal and research group of Chicago-based Willis.

"[Our] survey also suggests that, despite the increased costs, employers ... do not plan to eliminate that benefit, but are considering the possibility that the state exchanges will provide a potential option," he says.

That's assuming, of course, that the U.S. Supreme Court upholds the healthcare-reform law, following the oral arguments held in March.

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