Employers signal near-term cuts to employees’ health benefits

Facing the last few years before major health reform elements kick in, most employers say they are paring back benefits and pushing more costs to employees to keep benefits affordable.

More than a third of 2,300 businesses surveyed in December 2011 by the Willis Group, a global benefits consulting firm, said they have increased employee contributions. A third said they are “considering coverage changes to migrate to a lower cost option.” The survey was released March 8.

Continued pressure on benefits could hurt physician practices if patient volumes continue to slow, as they have since 2007.

Multiple studies by the RAND Corp. and other organizations have shown that workers with higher deductibles and cost-sharing use less health care, including less preventive care. Investment analysts and others have tracked annual patient traffic declines of up to 17%, blaming the drop on consumers holding off on spending for care as more of their budget is consumed by insurance premiums and deductibles.

For some employers, however, leaner benefits may be the only alternative to no benefits.

“By far the biggest number of employers said, ‘We’re just trying to keep the wheels on right now,’°” said Jay Kirschbaum, practice leader of the national legal and research group for the human capital practice at Willis.

Kirschbaum said employers see too much uncertainty ahead to lay out solid plans beyond 2014, when the Patient Protection and Affordable Care Act is scheduled to be fully in place.

They are reacting to the new regulations under health system reform as they arise, rather than taking a long-range strategy. In most cases, they have not told employees their plans for adapting to reform — because they don’t have plans.

For the moment, they are continuing what they’ve been doing the last few years: moving more employees to consumer-directed health plans, paring back benefits, pushing up deductibles and shifting costs to their employees as the cost of coverage rises.

“They are making changes as they go without giving a whole lot of thought to the strategic picture,” Kirschbaum said. “I think the changes are coming so quickly they haven’t had a chance to step back and say how [reform] is going to impact benefits.”

When Towers Watson surveyed employers in its annual survey with the National Business Group on Health, it heard similar sentiments, said Tom Billet, senior consultant and practice leader for health and group benefits at Towers Watson.

In the next three to five years, state-based health insurance exchanges are expected to launch, and experts expect the individual market to boom. Until those markets mature, “the vast majority of companies will want to stay in the game doing something similar to what they’re doing now,” Billet said.

Making workers more accountable

He said companies’ current and short-term strategies will include three main elements: “Education, incentives and accountability.” Employers are trying to get workers to understand the costs of care, how to get the most out of their benefits and are looking for tools to reward patients who make good health choices and even penalize those who do not.

Among respondents to the Towers Watson/NBGH survey, 40% said their top focus in health strategy beginning in 2013 was to “develop a workplace culture where employees are held accountable and supported for their health and well-being.”

That was an even more popular answer than “Stay up-to-date and comply with the [Patient Protection and Affordable Care Act],” which 34% of employers identified as a “top focus area.”

Employers’ plans create the potential for further administrative burden for physicians. Doctors could be forced to collect more out-of-pocket payments from patients and deal with increasingly lean benefits.

“The days of collecting $10 or $20 co-pays at the office and then filing claims with the insurance company — those days are rapidly dwindling,” Billet said.

Looking further ahead, employers are even unsure they will continue to offer health benefits. Just 23% of employers responding to the Towers Watson/NBGH survey said they were “very confident” they would offer benefits 10 years from now, down from 73% of employers who gave that answer in 2007. However, a Midwest Business Group on Health survey, released in late March, casts some skepticism on employers’ stated intentions. The survey of 440 employers noted that most who thought they would have dropped health insurance coverage because of reform have not done so.