Employers’ HR and benefits teams are facing the question of what to do in response to pending health care reform. Competing health care proposals are being hotly debated by Congress and the White House in Washington, D.C., and by legislators and their constituents around the country. The debate presents the full range of options, from enacting limited or no significant changes to enacting much more fundamental changes that require nearly all Americans to have health coverage that may include a public option. Most employers cannot wait for the resolution of those issues as they determine what health care plans to offer in 2010.
As we enter the fourth quarter of 2009, though, many companies are finalizing their decisions regarding the health benefits they will offer in 2010. Most companies do not have the ability to wait for the results of the health care debate before moving forward. The question then becomes “How are employers responding to the challenges and uncertainties?”
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What are the trends for health benefits in 2010?
The most likely change in 2010 will be that employers will either reduce benefits or increase the amount employees must pay in response to further increases in health benefit costs. The trend of rising health care costs is a familiar one to employers. An annual survey by the nonprofit Kaiser Family Foundation reported that employer-sponsored health insurance premiums rose five percent this year, bringing the total increase over the past decade to 131% –more than four times the rate of overall inflation.
Next year will only get worse for employees, the Kaiser survey found: When employers were asked about their plans for the future, the responses were sobering, although not surprising:
- 21% of firms now offering coverage said they are very likely to raise workers’ premium contributions in 2010.
- 16% are very likely to raise deductibles.
- 4% are very likely to restrict eligibility for coverage.
- 2% are very likely to drop coverage altogether.
The preliminary findings from the National Survey of Employer-Sponsored Health Plans 2009 , which is a survey by the national HR consulting group Mercer’s, state that employers would see costs rise by nearly 9% if they made no changes to their employee medical plans in 2010. Mercer’s survey, based on replies from 1,562 U.S. employer health plan sponsors that responded by the end of August 2009, indicates that on average, respondents plan to decrease their annual renewal rates through a variety of cost-saving actions, holding overall cost growth to 5.9% in 2010. In percentages that are greater than those predicted in the Kaiser survey, the Mercer’s survey projected that employers will achieve cost savings in 2010 by increasing employees’ monthly premiums (40%) and increasing deductibles, copays/coinsurance, or out-of-pocket maximums (39%).
Mercer’s survey also predicts the use of more consumer-directed approaches, including eliminating high cost or more generous health plan options as a way to move employees into lower-cost options such as consumer-directed health plans (CDHPs). CDHPs are high-deductible plans with an employee-controlled spending account — a health savings account or health reimbursement arrangement. Many of these plans give employees an incentive to take cost into consideration when seeking health care services by allowing them to save for future needs, on a tax-advantaged basis, account dollars they don’t spend in a given year.
What to do now in planning for 2010 health benefits
It is difficult to predict whether the health care debate will result in changes and what those specific changes may be. At this time, employers cannot count on savings or relief from the pending legislative proposals. Instead, the better course of action for most employers is to take a hard look at their health care costs and make appropriate business decisions based on their competitive and economic circumstances. There isn’t a one-size-fits- all approach, although the surveys we cited provide a useful list of many of the options employers are using to tailor cost-effective health benefits in 2010.
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