How Employers Plan to Deal With Health Care Reform

September 13, 2011

Towers Watson, a global professional services company, surveyed 368 midsize to large companies and found that “employers are planning only moderate changes in their health care plans for 2012.”
In addition, even though health costs are expected to rise 5.9% in 2012 compared to 7.6% in 2011, most employers will be working to control costs and avoid the excise tax. Almost half will change their health care strategy in 2012, and many are not sure how they will react to state-run insurance exchanges coming in 2014.

Some of the actions that employers are considering between now and 2014 include account-based health plan (ABHP) increases, value-based benefit designs, and increased usage of preferred networks. Additional changes under consideration for 2014 and 2015 include reductions to health care benefit values for active employees and employee healthcare contributions for lower-paid workers.

Here are a few more highlights from the survey results:

  • 71% will definitely continue offering health care coverage through 2014
  • 29% are not sure whether they will continue sponsorship or increase salaries to make up for any loss of employer-provided health care benefits
  • 53% believe “health care reform will be implemented within the anticipated timeline”
  • 70% are doubtful state-run insurance exchanges will be a viable alternative in 2014 or 2015

One statistic in the Towers Watson study that we found particularly interesting is the high percentage of employers (54%) that plan to discontinue health care benefits for pre-65 and post-65 retirees. We believe that public and private exchanges will provide a viable alternative for early retirees and a sustainable way for employers to continue to offer benefits to these individuals. Just as our employer clients today are able to control the cost of health care benefits for post-65 retirees with a defined contribution subsidy, the same model will work for early retirees starting in 2014 when all insurance is guaranteed issue.

Much is still unknown about the impact health care reform will have in the short- and long-term, which is why, “most employers will not make wholesale changes to employer-sponsored health plans in 2012,” said Ron Fontanetta, senior health care consulting leader at Towers Watson. “However, a small group of employers is driving more fundamental change in 2012 by using account-based platform designs, aggressively positioning incentives and rethinking subsidization levels.”

For more survey details and a snapshot of health care costs in 2012 visit Towers Watson.

Visit Extend Health — the nation’s largest private Medicare exchange.

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