U.S. businesses expect their health care costs to increase in the coming year, and many are looking at creative ways to temper that growth and cut down on rising expenses.
The National Business Group on Health (NBGH) examines the associated expenses of employer-provided health care plans among businesses annually to forecast how costs will increase in the not-too-distant future.
This year’s survey of 82 “large employers,” defined as those with between 5,000 and 100,000 employees, finds that, on average, companies are bracing for a 7 percent rise in the cost of the health care they provide employees in 2013.
That’s actually in-line with, or even a bit slower, than health care cost rises in recent years, with an 8 percent increase in 2009 and 7 percent in 2012. Still, costs are generally trending upward each year, with little likelihood of stopping.
NBGH President and CEO Helen Darling said cost increases “are still on a higher base from last year and are simply not sustainable,” adding that “HR leaders need to keep the pressure on to control health care cost increases, increase consumerism and individual accountability, use all of the tools and resources available to empower consumers to be wiser purchasers and support them to choose healthier lifestyles.”
The NBGH survey found that by far the most popular strategy for keeping costs down is using “consumer-directed health plans.” Fully 43 percent of all survey respondents consider it their “most effective tactic,” more than twice the number of respondents (19 percent) who consider “wellness initiatives” their most effective weapon in lowering costs.
About 60 percent of employers are taking a basic approach to deal with the increase: boosting the percentage of the premium paid by employees by a few percentage points. “Additionally, 40 percent plan to increase in-network deductibles while roughly one-third will increase out-of-network deductibles and out-of pocket maximums,” according to the survey.
Consumer-directed health plans allow employees themselves to shop for the best deal with the features they want. Generally, co-pay amounts are higher as well. A recent survey by RAND found that if enrollment in consumer-directed health care plans were to reach 50 percent of all insured workers, annual health care spending in the U.S. could decrease by as much $57 billion. Moreover, there is a realistic chance that these plans will eventually account for the majority of employer-sponsored health plans.
Wellness initiatives have also become a popular option in health care cost control and many companies are experimenting with them. According to NBGH, nearly half of all respondents “use incentives to encourage participation in [wellness] programs,” and “some employers are basing incentives on specific health outcomes.”
Examples include smoking cessation programs and plans designed to reward lower cholesterol levels, offering several hundred dollars or more per year to employees who perform well in these initiatives. About 20 percent of companies opt for the stick over the carrot, applying surcharges to employees who opt out of participating.
Whether or not they have a pressing financial need, many companies – especially mid- and small-sized businesses – could benefit from considering a corporate wellness program.
“Wellness programs have often been viewed as a nice extra, not a strategic imperative. Newer evidence tells a different story,” Harvard Business Review notes. “Government incentives or not, healthy employees cost you less. Doctors Richard Milani and Carl Lavie demonstrated that point by studying, at a single employer, a random sample of 185 workers and their spouses. The bottom line: Every dollar invested in the intervention yielded $6 in health care savings.”
Other common approaches to controlling health care costs mentioned include auditing dependent eligibility, specialty drug management, disease or condition management and pharmacy benefit design changes.
The NBGH survey also asked about what changes the companies were planning to make in response to the Affordable Care Act, which is currently scheduled to come into effect in 2014. (Republican presidential candidate Mitt Romney has vowed to repeal the act if elected)
Slightly over half of all respondents said that in response to the new directive, they “believed that some retirees might find state health insurance exchanges to be a viable option for health insurance,” according to NBGH officials, who added that “more than one-third (38 percent) felt that COBRA plan participants might consider exchanges, while 35 percent felt that part-time employees might consider exchanges.”
Whatever approach is used, finding a way to reduce or offset overall health care costs is becoming a critical business priority.
|Large U.S. Employers Expect to Hold Health Care Benefit Cost Increases to 7% in 2013...|
|by National Business Group on Health, Aug. 6, 2012|
|Growth of Consumer-Directed Health Plans to One-Half of All Employer-Sponsored Insurance Could Save $57 Billion Annually|
|by RAND Corporation, May 2012|
|What’s the Hard Return on Employee Wellness Programs?|
|by Harvard Business Review, December 2010|