Employers Look To Consumer-driven Plans To Lower Health Costs

The rising cost of health care will soon be reflected even more substantially in employee cost-sharing. A new National Business Group on Health survey shows that large employers anticipate their health care benefit costs to climb 7.2% in 2012. To help control those increases ahead of health care reform's Cadillac tax in 2018, the survey shows employers are planning to use a wide variety of cost-sharing strategies including CDHP premium boosts.

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To help control those increases and help avoid health care reform's Cadillac tax, employers are planning to use a wide variety of cost-sharing strategies.

"Increases have been in the high single digits for as long as I can remember, year after year, so I'm not surprised that they're looking to consumer driven health plans," says Bruce Elliott, manger of compensation and benefits at the Society of Human Resources Management. "It was inevitable that there would be a sharp increase in that. Employers are starting to see a value in them [consumer-driven plans], not just in the cost savings but overall health economics." More than half of respondents (53%) plan to increase the percentage that employees contribute to their premiums, while 39% plan to increase in-network deductibles. Additionally, about one in four employers plans to increase out-of-network deductibles and out-of-pocket maximums next years.

"We are clearly seeing a march toward a more aggressive consumer strategy," says Helen Darling, president and CEO of the National Business Group on Health. "If the consumer isn't actively engaged and has some financial stake there is absolutely no hope in controlling health care costs in our country." The survey, based on the responses of 83 large corporations, was conducted in June 2011. Key findings included: -49% of employers will not keep grandfathered plan status for 2012.

-Employers anticipate that retirees (53%) and COBRA plan participants (41%) who are currently covered under employer plans might have the option of exchange coverage.

-Employers find increased employee cost-sharing, consumer-directed health plans and wellness initiatives the most effective ways to control health care costs.

-75% of employers will offer a high-deductible health plan with a health savings account, compared to 64% in 2011.

All of this leads to more money out of the pocket of employees and employers, but perhaps for the first time, employees will feel the premium increases in their paycheck. An HDHP plan might not be the worst option for an employee who doesn't utilize health care frequently though.

"They'll see HDHPs [as] a potential take-way. If you have a young family and go to the pediatrician a lot, it could be the case. But if you're in the middle and you're not utilizing it very much, those high deductible plans can be a cost-savings," Elliott says. "The employee will pay 5,000 a year in premiums, but they're not utilizing health care but maybe once a year, versus gong to a richer health plan that costs more in premiums. And by the way, they'll get an HSA with the high deductible plan and employers pay money for health incentives." In a recent survey conducted by consulting firm LIMRA, 62% of surveyed employees said that when considering two similar jobs, benefits ranked as the greatest factor.

Darling commented on potential employee morale in the face of perceived benefits that are being taken away.

"Because health benefits have become more valuable relative to employee perception, three or four years ago it hit number one [in importance]. It was partly because they realized how much it cost," Darling says. "What people worry about and are demoralized by changes, especially when we're facing so much economic trauma." Elliott says that communication is key when these changes happen, especially when employees might view consumer-driven and high-deducible plans as a take-away.

"It's communication, communication and communication and a good level of transparency," Elliott says. Employees should know how much employers are footing the bill in premiums each year. "If they're getting hit with 15% increases, it's important that the employer show it to employees, so it's a shared deal. Employers could do a little more in terms of education."

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