U.S.

Employers Expect
Health Care Costs to Rise 4%
in 2015
U
.S. employers expect a 4% increase in
2015 health care costs for active
employees after plan design changes,
according to global professional services
company Towers Watson. If no adjustments are
made, employers project a 5.2% growth rate, putting
absolute cost per person for health care benefits at
an all-time high. Despite this cost trend, most (83%)
employers consider health benefits an important
element of their employee value proposition, and
plan to continue subsidizing and managing them for
both full-time and part-time active employees,
according to the 2014 Towers Watson Health Care
Changes Ahead Survey. They are, however,
continuing to rethink company subsidies for spouses
and dependents.
Of particular concern on the cost front is the Patient
Protection and Affordable Care Acts excise tax,
which goes into effect in 2018. Nearly three-quarters
(73%) of employers said they are somewhat or very
concerned they will trigger the tax based on their
current plans and cost trajectory. More than four in
10 (43%) said avoiding the tax is the top priority for
their health care strategies in 2015. As a result of
the excise tax and other provisions of the health
care reform law, CEOs and CFOs are more actively
engaged in strategy discussions.
In the current economic climate, affordability and
sustainability remain dominant influences on
employers overall health care strategies, said
Randall Abbott, senior consultant at Towers
Watson. Expense management and worker
productivity are equally critical to business results.
While employers are committed to providing health
care benefits for their active employees for the
foreseeable future, persistent concerns about cost
escalation, the excise tax and workforce health have
led to comprehensive strategies focused on both
year-over-year results and long-term viability for
health care benefits and workforce health
improvement.
The emphasis is on achieving or maintaining a high
-performance health plan, continued Abbott. And
CFOs are now focused on a new gold standard:
managing health cost increases to the Consumer
Price Index. This requires acute attention to
improving program performance.
Combatting The High Cost Of Health Care
In response to short and long-term cost concerns, a
growing percentage (81%) of employers plan
moderate to significant changes to their health care
plans over the next three years, up from 72% a year
ago. One tactic employers will use to curb spending
in 2015 is specialty pharmacy management.
Companies project that pharmacy-only cost trend
SEPTEMBER 2014:
U.S. Employers Expect Health Care Costs
to Rise 4% in 2015
U.S. Employers Changing Health Benefit
Plans to Control Rising Costs, Comply with
ACA
Survey: Job Seekers Unwilling to Compromise
on Key Benefits
This newsletter is for informational purposes only and should not be considered as legal advice.
Executive Perspectives
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will be 5.3% after plan changes (6% before
changes). Employers will also embrace telemedicine
for virtual physician office visits to improve access
and efficiency of care delivery. Another key tactic is
new payment approaches that hold providers
accountable for the cost of an episode of care and
outcomes.
Longer term, for 2016 and 2017, nearly half (48%)
of employers are considering tying incentives to
reaching a specified health outcome such as
biometric targets, compared with just 10% that
intend to adopt it in 2015; 37% are considering
offering plans with a higher level of benefit based on
the use of high-performance or narrow networks of
medical providers, compared with just 7% in 2015.
One-third (34%) of employers are considering
telemedicine, compared with 15% in 2015, further
accelerating technology as a way to improve
engagement and medical care access, and manage
costs.
Another cost-mitigation tactic being considered for
2016 and 2017 are changes in how employers
subsidize health care for spouses and dependents.
A third (33%) of employers are considering
significantly reducing company subsidies for
spouses and dependents; 10% have already
implemented such reductions, and 9% intend to do
so in 2015. In addition, 26% said they are
considering spouse exclusions or surcharges if
coverage is available elsewhere; 30% have that
tactic in place now, and another 7% expect to add it
in 2015.
Employers are also examining caps on health care
coverage subsidies for active employees, using
defined contribution approaches, with 30% of
employers considering them for 2016 and 2017,
13% having them in place today and another 3%
planning them for 2015.
Despite the challenge of managing the high cost of
health benefits, nearly all employers (99.5%) said
they have no plan to exit health benefits for active
employees and direct them and their families to
public exchanges, with or without a financial
subsidy. Three out of four employers (77%) said
they are not at all confident public exchanges will
provide a viable alternative for their active full-time
employees in 2015 or 2016.
The most effective employers are continually
evaluating new strategies for improving health plan
performance, Abbott noted. Examples include a
steady migration to account-based health plans
(ABHPs), action-based incentives, adoption of value
-based payment methods with health plan partners
and plan designs that drive efficiencies. Other
options are technology-based solutions such as
telemedicine, fitness devices or trackers, and social
media to encourage employees to take a more
active role in both their personal health status and
how they use health care goods and services.
Note: According to the Patient Protection and
Affordable Care Act, in 2018, the federal
government will impose a non-deductible excise tax
on the value of employer-sponsored health
programs that exceed an aggregate value of
$10,200 for individual coverage and $27,500 for
family coverage. The tax equals 40% of the value
that exceeds these thresholds.
________________________________________
U.S. Employers Changing
Health Benefit Plans to
Control Rising Costs, Comply
with ACA
H
ealth care benefit costs at large employers
are expected to increase 6.5% in 2015,
slightly lower than this years rate of
increase. Most employers, however, say
they will be able to stem increases even more as a
AWANE September 2014
Executive Perspectives Page 2
result of changes they are making to their benefit
plans, according to an annual survey released today
by the National Business Group on Health, a
non-profit association of nearly 400 large U.S.
employers. The survey also found that the number
of employers offering workers a consumer-directed
health plan (CDHP) as the only health benefits
option is expected to surge by nearly 50% next
year.
According to the survey, employers project their
health care benefits costs will increase by an
average of 6.5% in 2015. That is slightly lower than
the 7.0% increase employers would have
experienced this year had they made no changes to
their plan design. However, employers expect to
keep increases to 5% next year after making
changes to their plans, such as increasing
cost-sharing provisions, implementing and
expanding CDHPs, and broadening their use of
wellness programs and Centers of Excellence. The
survey, based on responses from 136 of the nations
largest corporations, was conducted in June 2014.
Despite the many distractions that the Affordable
Care Act (ACA) has created, large employers
havent lost sight of the fact that rising health care
costs remain a significant issue that needs to be
constantly addressed, said Brian Marcotte,
president and CEO of the National Business Group
on Health. Our survey shows that many employers
are, in fact, taking necessary steps to rein in costs.
This includes partnering with workers to engage in
health care decisions and educating them to be
better health care consumers, as well as sharing
more costs with workers and narrowing their benefit
options.
The survey found that employers are making
numerous changes to their benefit plans in an effort
to control costs as well as comply with the ACA and
stay below the excise tax set to be implemented in
2018. Nearly three in four respondents (73%) are
adding or expanding tools to encourage employees
to be better health care consumers. More than half
(57%) are implementing or expanding CDHPs while
53% will either add or expand wellness program
incentives. Perhaps the most significant finding is
the nearly 50% increase in the number of employers
that plan to offer a CDHP as their only benefit plan
option next year. Almost one-third (32%) plan to do
this in 2015, compared with 22% this year.
Mixed Views on Private Exchanges
While no employers have or intend to eliminate
health benefits coverage for their active employees
next year, interest in private exchanges is growing,
albeit slowly. By next year, 3% of large employers
will provide their active employees with health
insurance through a private exchange while 35%
said they are considering doing so for 2016 or
beyond. Meantime, 14% of respondents are
partnering with a private exchange for their retirees,
an increase from 10% last year. Another 7% are
planning to move retirees to private exchanges next
year.
The survey, however, revealed mixed views from
employers in their confidence that private
exchanges will perform better than their own benefit
plan. For example, 77% are confident in the
exchanges ability to provide more choice of plans
while 51% said exchanges will do a better job
complying with regulations. However, only 17% are
confident that exchanges do a better job of
engaging employees in better health care decision
making and only one in 10 believe exchanges will
control costs better than their own plans.
Employers, including many of our members, are
clamoring for information and help in understanding
private exchanges and whether they make sense for
their organizations. The proliferation of private
exchanges is presenting employers with an option
but one that employers need to ask questions and
AWANE September 2014
Executive Perspectives Page 3
study carefully. For example, employers will want to
determine whether a private exchange can manage
costs and care more efficiently than what they are
currently doing, said Marcotte.
Among other findings from the survey:
Narrow Networks: Despite recent attention, on-
ly one-fourth of employers (26%) include a nar-
row network in any of their plans. Half of those
(13%) offer a plan that incents employees to use
a narrow network within the plan.
Specialty Pharmacy Benefits: Some employ-
ers are adopting techniques specific to specialty
medications to help control costs. One third
(33%) use a freestanding specialty pharmacy
while 29% only approve coverage for a 30-day
initial supply.
Weight Management: Nearly three-fourths of
respondents (73%) will cover surgical interven-
tions for the treatment of severe obesity while
41% will cover FDA-approved medication. Both
are increases from the percent of employers that
cover these this year.
________________________________________
Survey: Job Seekers Unwilling
to Compromise on Key Benefits
J
ob site Monster.com recently revealed the
top-line results of a survey of nearly 1,100
registered U.S. Monster users around job
search activity, job satisfaction and what is
required to pursue or accept a new job opportunity.
The results from Monsters Workforce Talent Survey
includes current job seeker challenges, motivating
factors driving them to a career change, their
confidence in finding a job, and job outlook by
several key occupations.
The majority of survey respondents, both employed
and unemployed, are actively looking for a new job
(70%), yet very few responded that they would be
willing to make the following sacrifices in order to
accept a new opportunity:
Benefits 13% would compromise on
healthcare benefits and 14% on academic
reimbursement
Vacation 16% would accept reduced vacation
or personal time
Compensation 19% would accept reduced or
no bonus and 20% would accept a lesser salary
Hours 24% would work more hours
Workspace 26% would consider having a
small office or desk space
Commute 28% would be willing to undertake
a longer commute
Dress code 30% would agree to a strict dress
code
Temporary positions 33% are willing to take
on temporary or contract roles
"With the economy and job market slowly improving,
job seekers will be more likely to be searching for a
job and less likely to make sacrifices," said Jeffrey
Quinn, Vice President of Monsters Global Insights.
"Employers need to be aware of these unsettled
employees, understand their expectations, and
incent accordingly."
AWANE September 2014
Executive Perspectives Page 4
"With the economy and job market
slowly improving, job seekers will be
more likely to be searching for a job and
less likely to make sacrifices.