Employers reducing spousal, family coverage

Benefits Pro reports:

“The evidence continues to mount that mid-to-large corporations will fine-tune, but won’t abandon, employee health plans.

A Towers Watson survey of 379 companies in that size range found, among other trends, that companies believe in providing health coverage, but want to be able to predict the cost of coverage.

To accomplish both, they are gradually shifting some costs to employees, eliminating some benefits, such as spousal coverage, and encouraging their workers to take more ownership of their health coverage to share in the economic risk of providing coverage.

Among the most pervasive actions that companies will take in the next few years, Towers Watson said, were to:

  • Expand account-based health plans (ABHPs);
  • Establish direct cost arrangements;
  • Reduce financial support for spouses and dependents;
  • Adopt new technology solutions;
  • Offer action-based incentives;
  • Control specialty pharmacy spending;
  • Employ network optimization approaches;
  • Adopt exchange-based benefit options.

The wide-ranging survey sought participant input on the key health insurance issues of the day. Among the survey’s big-picture conclusions:

  • Employers remain committed to health care for active employees and view it as a key part of their employee value proposition.
  • Employers don’t envision shifting employees to public exchanges for health coverage.
    CEOs and CFOs are more engaged in health care strategy decisions, given their significant business implications.
  • The use of value-based designs and benefit differentials that drive employees to high-performance or narrow networks for medical care is projected to rise.
  • Employers’ actions will have a material effect on employees and their families as a result of companies’ growing focus on outcome-based incentives and the way they subsidize coverage for spouses and families.
  • Employers’ interest in private exchanges for active employees continues to grow, but many await additional evidence that this model can deliver more value than their traditional self-managed program.
  • Employers will use technology as a pivotal tool in strategies to boost employee engagement and improve access to health care.

The survey added more evidence to forecasts of modest health care cost increases in the next few years. Those surveyed generally see increases of 4 percent to 5 percent in the short term, and will take “moderate to significant changes to health benefit programs for full-time active workers” to keep costs predictable and relatively stable.

Among the actions many anticipate taking: adding a surcharge to cover an employee’s spouse, or refusing to cover them altogether, when the spouse can get coverage elsewhere. Participants said they were examining reduced family coverage in general in order to keep costs from rising beyond a certain ceiling.

By 2017, 63 percent of employers will add surcharges or exclude spouses from coverage when employer-sponsored health coverage is available elsewhere, Towers Watson found.

The looming impact of the Cadillac, or excise, tax on certain health plans has the attention of the corporate benefits managers. They are taking action now to try to mitigate the effects of the tax, scheduled to kick in in 2018. As things now stand, 54 percent of those surveyed said they would trigger the tax if they don’t make significant changes to their benefits plans. Two-thirds of those surveyed said they believed adapting plans to the excise tax would shape their plan strategies in the next two years. Three-quarters said they were worried about triggering the tax when it takes effect.

Other findings from the survey:

  • 37 percent said they would have some form of telemedicine included in their plan by 2015, with another 34 percent considering the option by 2017;
  • 18 percent of employers offer outcomes-based plan elements today, and nearly 60 percent more said they would have such incentives in their plans by 2017;
  • 66 percent will use eligibility and/or utilization restrictions as part of their specialty pharmacy strategy by 2015. Another 15 percent are considering this solution for 2016 or 2017;
  • 58 percent will evaluate and focus on specialty pharmacy spend within the medical benefit by 2015, and 24 percent more will consider this by 2016 or 2017.