Risk & Compliance

The Evolving Wisdom on Health-Plan Design

Health-care reform is causing only some of the flux.
David McCannAugust 24, 2011

Many large employers are acting now to implement, or move toward implementing, some elements of the Affordable Care Act (ACA) that will not be required until 2014 or later, suggests the latest report on health-plan design changes by the National Business Group on Health.

In some cases, the moves are not necessarily an effort to get ahead of the upcoming requirements; rather, they are in line with ongoing trends in employer-sponsored health-care coverage that the reform law merely recognized and fashioned as “essential” benefits, says Helen Darling, CEO of the nonprofit association, whose 329 member organizations all have more than 5,000 employees.

For example, 27% of the 83 employers that participated in the group’s research effort are planning changes for 2012 to the annual benefit limits under preventive and wellness services. That may be a seeming nod to the forthcoming ban on annual coverage caps for all types of health-care services, but large companies have been increasing or eliminating caps for years. “They didn’t need a law to tell them to do that,” contends Darling. “Some decided to change or remove the caps because they’re not popular with employees, and some decided it didn’t cost all that much to do so anyway.”

Similarly, while companies will be required as of 2014 to automatically enroll new hires into a health plan, large ones have already been increasingly on that path.

(It should be noted that trends in plan design among large companies are far from meaningless for smaller ones. The choices big employers make tend to trickle down, and also to drive what insurers offer to others.)

The association’s research did address a number of future-looking points with regard to the ACA, such as by asking survey participants what they expect to be their default health plan for newly hired employees. While one-third said they have not decided or noted that they offer only one health plan, 27% expect the default to be whichever plan is least costly for the employee, topping the 18% who are looking at the least costly plan for the employer.

But, Darling notes, a budding trend among “leading” employers in health-plan design is to make available a superior plan for employees who participate in wellness and preventive initiatives that target their particular risk factors, while others would get the lesser plan. “We know from behavioral economics that the most powerful way to motivate people is through loss aversion,” she says. “We hate to lose something. So you can say to employees, if you don’t do these things to make yourself healthier, you’re not going to get the good plan.”

The survey also found that only 23% of the large companies expect to still have a “grandfathered” plan in 2012 (meaning that, in exchange for an exemption from implementing some of the ACA’s provisions, they have made no significant changes since the act’s passage to the employer’s and employees’ respective shares of the total health-care tab). Even so, that 23% figure may be somewhat artificially high. Some employers are stuck with health-care plans that were agreed upon in collective bargaining with unionized workers, so they don’t even have a choice about whether to grandfather.

On another ACA-related topic, survey participants were asked what employee groups they thought would find the state health exchanges mandated by the law — currently expected to be up and running in 2014 — to be a viable health-care option. Fifty-three percent said retirees would find the exchanges useful, followed by COBRA plan participants (41%), part-time employees (33%), spouses or dependents (17%), and full-time employees (16%).

While employers as a whole have been critical of the ACA on many fronts, Darling pointed to the exchanges as an example of a provision that would be very valuable if the law emerges exactly as intended. It would offer great opportunity for retirees under age 65 who are not yet eligible for Medicare, as well as for part-time workers, including spouses who may work either part-time or seasonally, while also perhaps enabling the dissolution of the expensive COBRA coverage.

But, Darling says, “people may be in a bit of a fantasy world. We haven’t seen the exchanges, yet there is an image of them as excellent, high-quality, affordable plans that provide everybody who has a low or moderate income with subsidies. But who knows? And anyway, who’s going to pay the taxes [necessary to fund the exchanges]? We don’t know.”

Meanwhile, the participating large companies collectively forecast that their health-care costs will rise by 7.2% in 2012, down just a smidgeon from the 7.4% jolt they experienced this year over last. Darling says she’s been surprised and disappointed by the size of the annual hikes since the recession began in 2008.

“These kinds of increases,” she says, “on top of the base we already have, are ridiculous in the middle of what’s essentially a melted-down economy,” which on a net basis has grown much less over that entire time than health-care costs rise every year.

To combat the rising costs, more than half of respondents plan to increase the employee-paid share of premium costs next year, while significant numbers will ratchet up deductibles and out-of-pocket maximums (see chart). Those increases would be lower if employees would only heed the advice their employers give them, insists Darling.

“Good” employers are telling employees how they can save money within the existing plan, both for themselves and the company. But less than half of people will take a generic drug when there are alternatives to brand-name drugs, and many still buy drugs retail instead of using mail order, according to Darling. Further, even doctors say that more than half their patient visits could have been handled competently and much less expensively by another party, such as a nurse’s helpline for advice on how to treat a cold or a walk-in clinic staffed by practitioners such as physicians’ assistants for basic diagnostic and treatment services.

“Employees are using a lot of health care they don’t need,” says Darling.



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