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CCH® BENEFITS — 06/22/11

Health Reform Prompts Most Employers To Begin Modifications

from Spencer’s Benefits Reports: In the year since the Patient Protection and Affordable Care (ACA) was enacted, employers continue to maintain their health care benefits, implement cost-sharing methods, and assess the long-term impact of reform on their organizations, according to a recent survey released by the International Foundation of Employee Benefit Plans (IFEBP). The survey, Health Care Reform: Employer Actions One Year Later, reviewed actions employers have taken in the 12 months since the ACA became law and explored their plans for the upcoming year. It is the second in a series of IFEBP surveys on the effect of the (ACA) on single employer plans. The majority of survey respondents (62.5%) are focused on making necessary changes to make their plans ACA compliant, the IFEBP found.

“For the most part, employers have moved beyond the ‘wait and see’ phase they were in just a year ago and are beginning to take action,” explained Sally Natchek, senior director of research at the IFEBP. “Although many employers are concerned about rising costs, very few have drastically altered or ended their health care benefits. Most employers remain committed to offering quality health care benefits to their employees.”

Rising Costs, Employee Cost-Share Expected

The majority of employers (60%) have conducted an analysis to determine how the ACA will affect their 2011 plan costs. Among respondents analyzing ACA cost effects, 85% expect their health care costs to rise, with the largest proportion (36%) estimating a cost increase in 2011 of 1%-2% due to the ACA. Although extending coverage to adult children to age 26 is still seen as the top driver of cost increases (by 33.4% of respondents), administrative costs and cost-shifting due to reduced Medicare/Medicaid payments to providers have emerged over the past year as major concerns by 27.5% and 28% of respondents, respectively. Approximately one in ten responding organizations (10.5%) currently is redesigning their primary health plan to reduce premiums and avoid triggering the 2018 excise tax on “Cadillac plans” with vlaues that exceed a specified dollar amount.

In anticipation of increased costs, employers are boosting employees’ share of premium costs (40%), in-network deductibles (29%), and employees’ proportion of dependent coverage cost (28%). Many employers also plan to increase out-of-pocket limits and copayments or coinsurance for primary care (27% and 24% respectively). Also, about one-third of (32.4%) employers have conducted dependent eligibility audits in the past 12 months, or plan to do so in the next 12 months.

Although many employers are looking for employees to help manage rising costs, few plan to eliminate or reduce their health plan benefits as the result of health care reform. Just 2.6% are planning to cut health benefits for new hires, 1.6% are planning to drop dependent coverage, 0.9% will close health benefits to new hires, and 0.8% will discontinue health benefits for active workers or retirees. Less than 1% of employers (0.7%) plan to stop providing employees with health care coverage in 2014, when “play or pay” provisions become effective. This finding is radically different from the McKinsey & Company survey conclusion that 30% of employers will definitely or probably stop offering employer-sponsored insurance in the years after 2014.

Additionally, although required only to extend health care benefits to adult children until age 26, 60% of employers are extending the eligibility requirements to other benefit plans (primarily for dental and vision benefits) to conform to the requirements of their medical plans.

Few Will Maintain Grandfathered Status

Although employers report some benefits of maintaining their plan’s grandfathered status—such as the exemption from the appeals process and the mandatory coverage for preventive care with no cost sharing or annual limits—just 30% (of the 44.6% of respondents whose primary plan is currently grandfathered) expect to maintain grandfathered status beyond the next three years.

“Maintaining grandfathered status will be very challenging for employers,” stated Ms. Natchek. “Plans can lose the status in numerous ways, including reducing benefits, raising coinsurance or significantly raising copayments or deductibles. To remain grandfathered, an employer will be able to make only limited changes in their health care plan. This does not appear feasible for most organizations.”

More Wellness And Related Programs

In light of the ACA, 18% of employers have adopted or expanded their use of wellness initiatives in the last 12 months, and more than one-quarter (27%) plan to do so in the next 12 months. Additionally, 38% are expanding the use of financial incentives to encourage healthy behaviors, and 27% are adopting or expanding their disease management offerings.

High-Deductible Plan Interest Continues

Employers continue to perceive value in the role of high-deductible health plans (HDHPs) for cost management. As a result of the ACA, approximately one-third of responding organizations (33%) are increasing their emphasis on or assessing the feasibility of HDHPs with a health savings account (HSA). Rarely are employers reducing their emphasis or assessing the feasibility of dropping HDHPs.

The survey is based on responses from 1,350 individuals, including benefits and human resources professionals, general and financial managers, and other professionals, who are members of the IFEBP and the International Society of Certified Employee Benefit Specialist (ISCEBS). For more information, visit http://www.ifebp.org/books.asp?7051E.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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