By Tricia Blazier, J.D., Allsup | April 2016
Employers have a range of strategies in the wake of the Patient Protection and Affordable Care Act of 2010 (PPACA), health-care reform and rising costs. Tactics include adding spousal benefit surcharges, switching full-time employees to part-time status and vice versa, and offering more account-based plans such as health savings accounts (HSAs) with high-deductible health plans (HDHPs). Employer-sponsored insurance covers about 147 million people in the United States, according to the "2015 Employer Health Benefits Survey," produced by the Kaiser Family Foundation and Health Research & Educational Trust.
Employers' strategies typically focus on steps such as changes to network offerings, plan structures and benefits programs for full-time active employees. Of course, these employees should be a central focus. But alternatives for other employee populations can go overlooked by HR and benefits teams.
These groups may not hit the radar in the annual review of health-care benefits planning because they are smaller and less prominent in terms of ensuring the business's function. These groups include retirees and their dependents, individuals using COBRA, low-income and part-time workers, and those with disabilities. The costs of serving other worker populations can be costly, especially for self-insured employers. For example, administering a COBRA program for departing employees can cost 50% more than having the person on the business's health plan as an active employee. Providing retiree health-care benefits is another costly program, with about 50% of Fortune 1000 companies carrying an estimated $285 billion in retiree health obligations, according to a 2015 Towers Watson report.
Employers have taken a closer look at their part-time employee base because the PPACA mandates health-care insurance for employees who work at least 30 hours per week or the equivalent. Additional avenues, however, may be available to provide low-income workers with options to meet the individual mandate.
Benefits professionals are in the tangle of these issues during their annual formulation of their benefits program. But it's important to take a step back and see the broader evolution taking place with continued development of the federal and state exchanges on the Health Insurance Marketplace. There is one program that heralded this current evolution — Medicare.
More employers are examining the cost-saving benefits of shifting retiree populations from an employer-provided plan to Medicare. For example, a Towers Watson report found 78% of employers were using or considering private Medicare exchanges to assist retirees with their coverage. As Baby Boomers reach Medicare eligibility, employers are tasked with handling the complexity of coordinating employer-provided health benefits with Medicare. About 1 in 4 employers offers health benefits to its retiree population, according to Kaiser.
At the same time, retirees are realizing the advantages of Medicare by discovering real out-of-pocket cost savings and coverage that is comparable or even richer than their benefits from a former employer. One key benefit of Medicare plan selection: It can be personalized to the individual. Retirees may have 40 or 50 plan options to select from, depending on their geographic region, compared to the solitary plan offered by a former employer.
This advantage is now being echoed in the opportunity of the marketplace. Employees in transition now have more options for health-care coverage, including the ability for some people to access subsidies that provide significant financial relief. In 2016, an individual, his/her spouse and their children may all receive health-care coverage through separate plans.
These ongoing transitions are playing out in the marketplace with wider use of exchanges and public options such as the Health Insurance Marketplace, Medicare and Medicaid. It's a progression that is leading us to the future vision of health care in the U.S.
Consumer-driven health care has added meaning. As individuals become more informed and more engaged in their health-care choices, they are helping to drive the changes the marketplace is experiencing. Health-care exchanges offer more options for individuals to truly personalize the coverage that meets their needs. Both consumers and employers are interested in changes that reduce their out-of-pocket costs.
Thought leaders have forecast for some time that growing portability of health-care insurance will mean more people will buy a plan and take it with them wherever they go. Employers are seeing this leading edge of the shift with their secondary groups, who are choosing plans that belong to them as individuals versus relying on the 1 or 2 options offered by an employer.
All of this opportunity to shop for coverage and better understand the costs of health care reflects on another issue — changing health and wellness behaviors in order to reduce costs. Some studies have shown that a sizable portion of health-care costs, as much as 75%, is based on lifestyle behaviors. Our health-care evolution is likely to continue.
About the Author
Tricia Blazier, J.D., is director of Healthcare Insurance Services at Allsup.
Read the April edition of Benefits & Work-Life Focus.
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