A Billion-Dollar Decision: Charting A New Course for U.S. Healthcare Benefits

Healthcare benefits have long been an integral part of the employee value proposition—and a multibillion-dollar expense for the largest U.S. corporations. But today, in light of the Affordable Care Act (ACA) and rapidly rising benefit costs, many employers are considering their options.

While last year’s Supreme Court ruling on ACA removed a large element of regulatory uncertainty, U.S. corporations still have complex, multifaceted decisions to make on health benefits. In this point-of-view paper, Alan McIntyre, Tom Robinson and Sam Glick describe how healthcare is changing and how employers can think strategically about their choices.

WEBINAR REPLAY

We invite you to watch a replay of our Billion Dollar Decision webinar. The authors discuss the challenges and opportunities presented by the new healthcare landscape, the innovation that has occurred so far, and how employers can reduce healthcare costs and improve employee satisfaction by considering new strategies.

Billion Dollar Perspective

Large employers are well aware that lower-value benefits could hurt them in the talent markets. As the chart below indicates, more than 40 percent of employers are what we call reformers—they are actively engaged in piloting value-based healthcare and are searching for new solutions.

1What effect is the Affordable Care Act having on employer-sponsored insurance?

There have been several. We’ve noticed, for instance, that even though the federal excise tax on “Cadillac plans” doesn’t take effect until 2018, employers are already raising the deductibles on the plans they offer in an effort to get premiums below the threshold. And overall, there’s been a tendency to align coverage with ACA’s gold, silver, and bronze actuarial levels and the standard benefits required of health plans offered on the exchanges.
2What about consumer-directed health plans? Are employers considering them?

Considering them—and implementing them. In 2009 about 20 percent of employers offered CDHP options. By 2012, just three years later, that number had almost doubled. In that same time period, the proportion of employees enrolled in CDHPs went from 8 percent of covered employees to 15 percent. And when we surveyed employers in 2012, 44 percent said they expected to offer a health savings account in 2014.
3There’s been talk that employers will simply drop health benefits. Are they doing that?

Very few large employers seem to be moving in that direction—a bit less than 10 percent, we estimate, most of them in sectors with unskilled workers and high turnover. A plurality of large employers—more than 40 percent—are actively engaged in trying to come up with a better way to provide healthcare benefits, one that gives them a healthy, engaged workforce but frees them from some of the burden of rising healthcare costs.
4What would accomplish those goals?

One very important alternative is the use of private healthcare exchanges. Instead of offering two or three healthcare alternatives to employees, an exchange approach lets them offer a much wider range of health plans at different price points and with different approaches that make sense for smaller groups. It’s a model that also lends itself well to a defined contribution approach—something that roughly 60 percent of employers are using or actively considering.