Healthcare and employers - inseparable? Maybe not. With the Supreme Court ruling to uphold the Affordable Care Act and the president's re-election, employers have never had a better opportunity to re-examine their long term role in providing healthcare coverage. The year 2013 will likely be the turning point for how healthcare benefits evolve over the next decade.
Employers may decide to transition out of healthcare altogether or elect to move toward a defined contribution approach with the exchanges. Others will double down on cost reduction efforts through consumer-driven healthcare or wellness programs - but, it won't be easy. HRI research found that only 21% of consumers have changed their behavior as a result of their employer changing benefit offerings or wellness programs (See figure).
For more information about employer sponsored healthcare benefits, you may read more here.
Healthcare and employers—inseparable? Maybe not. With the Supreme Court ruling to uphold the Affordable Care Act (ACA) and the president’s re-election, employers have never had a better opportunity to re-examine their long term role in providing healthcare coverage. The year 2013 will likely be the turning point for the evolution of healthcare benefits over the next decade.
For almost 70 years, employer-based coverage has been a cornerstone of US healthcare. A result of wage-price controls dating back to World War II and favorable tax treatment ever since, healthcare benefits are a core component to attracting and retaining talent. But once seen as a tax-efficient way to reward employees, healthcare costs are now infringing on many corporations’ efforts to compete globally.
Healthcare costs now rank second or third to wage costs. The median employer share of payroll going toward health insurance costs was 12.8% in 2010, up from 8.2% in 1999.1 Many employers are concerned about the financial impact of new mandates, taxes (including the 40% “Cadillac” excise tax on high cost plans starting in 2018), and administrative challenges brought forth by the ACA. And, with healthcare entitlements center stage in the ongoing budget debates at both the state and federal levels, employers are concerned that cost-shifting from these programs will only accelerate in the future.
Until now, an individual insurance market seen by many as dysfunctional has left employers no choice but to continue offering coverage, even with the rising cost. But a number of provisions of the ACA, such as guaranteed coverage, elimination of pre-existing condition exclusions, and government subsidies for the poor and many in the middle class, have strengthened access and affordability for those without employer-based coverage. Now employers are beginning to consider the new state exchanges as a potential safety net for employees or retirees and are looking at private exchanges as alternatives to the status quo.
In 2013, corporate leaders will embark on “pay or play” financial analyses and many will ask tough questions such as why they focus so many resources on something that is not core to the business. Some employers may decide to transition out of healthcare altogether: a recent third-party survey found that only 23% of employers are very confident that their organization will offer healthcare benefits a decade from now, compared with 73% in 2007.2 Others will elect to move toward a defined contribution approach, similar to 401(k) retirement plans, with the exchanges. Still others will double down on their efforts, both individually and collectively, to bend the cost curve through consumer-driven healthcare, wellness programs, and new efforts related to delivery and payment reforms. However, this will not be easy. PwC’s Health Research Institute’s consumer survey found that only 21% of consumers have changed their behavior as a result of their employer changing benefit offerings or wellness programs.3