Scal­ing back

Some em­ploy­ers al­ter­ing health plans in reaction to ACA, ris­ing costs

Modern Healthcare - - THE WEEK IN HEALTHCARE - Rachel Lan­den

The Univer­sity of Vir­ginia last week joined the small but fast-grow­ing co­hort of ma­jor em­ploy­ers mak­ing dra­matic changes to their health­care plans for 2014, which many are blam­ing on ris­ing health­care costs and the im­ple­men­ta­tion of the Pa­tient Pro­tec­tion and Af­ford­able Care Act.

Work­ing spouses who can get health ben­e­fits through their own em­ployer will no longer be el­i­gi­ble for cov­er­age un­der the univer­sity’s plan. More­over, pre­mi­ums will rise for those who fail to join the univer­sity’s well­ness pro­gram, which in­cludes a bio­met­ric screen­ing and on­line health as­sess­ment.

“The sig­nif­i­cant changes re­flect dif­fi­cult de­ci­sions in some cases, but in all cases the mod­i­fi­ca­tions are be­ing made with an eye on long-term strate­gic re­sults,” said Su­san Car­keek, chief hu­man re­source of­fi­cer at the univer­sity. She es­ti­mated the ACA will add $7.3 mil­lion next year to the cost of its health plan, which cov­ers more than 13,600 em­ploy­ees, plus fam­ily mem­bers.

At­lanta-based UPS an­nounced sim­i­lar cuts in cov­er­age for its em­ploy­ees’ mates last month, declar­ing that it would no longer pro­vide health­care ben­e­fits to about 15,000 spouses of UPS em­ploy­ees.

While in­stances like th­ese have re­ceived ma­jor me­dia at­ten­tion, scal­ing back health­care cov­er­age in this fash­ion is hardly a wide­spread phe­nom­e­non. Ac­cord­ing to a 2013 sur­vey con­ducted by the In­ter­na­tional Foun­da­tion of Em­ployee Ben­e­fit Plans, only 1.3% of re­spon­dents had dropped spousal cov­er­age, and just an­other 4.2% said they planned on do­ing so in the next 12 months be­cause of the Af­ford­able Care Act.

“Deny­ing cov­er­age for work­ing spouses who are el­i­gi­ble is a rare prac­tice,” said Cyn­thia Wei­d­ner, vice pres­i­dent of client de­vel­op­ment at ben­e­fits con­sul­tant HighRoads. Wei­d­ner in­stead points to spousal waivers or sur­charges, meth­ods that she says have been in use for a while now when the spouse has an­other op­tion for cov­er­age.

At Penn State, for in­stance, a monthly in­sur­ance sur­charge of ap­prox­i­mately $100 will be added to ben­e­fits-en­rolled spouses who are el­i­gi­ble for health­care cov­er­age through their own em­ployer but who elect to use the univer­sity’s cov­er­age in­stead. And sim­i­lar to what will hap­pen at the Univer­sity of Vir­ginia, an­other $100 sur­charge will be as­sessed on top of that for em­ploy­ees and spouses who do not com­plete an on­line well­ness pro­file and an an­nual preven­tive phys­i­cal exam.

“There’s a fo­cus around well­ness, putting more teeth into well­ness pro­grams and achiev­ing out­comes,” said Mike Thomp­son, a prin­ci­pal in Price­wa­ter­house­Coop­ers’ global hu­man re­sources ser­vices prac­tice.

“Re­gard­less of health­care re­form, com­pa­nies are try­ing to ad­dress ris­ing health­care costs and the de­clin­ing health of the pop­u­la­tion,” added Craig Rosen­berg, health and wel­fare national prac­tice leader at Aon He­witt.

Well­ness ini­tia­tives, like the ones at the Univer­sity of Vir­ginia and Penn State, seek to tackle both is­sues. It’s a holis­tic ap­proach that, ac­cord­ing to Aon He­witt’s 2013 Health Care Sur­vey, more than 70% of em­ploy­ers have con­sid­ered. “It’s not just di­rect health cost,” Rosen­berg says. “If peo­ple are not healthy, you’re go­ing to have more ab­sen­teeism, leaves and dis­abil­ity, and cost the com­pany in terms of pro­duc­tiv­ity.”

But dis­cus­sions sur­round­ing di­rect costs still re­main on the ta­ble, with a ma­jor fo­cus on shift­ing those costs from em­ployer to em­ployee. For some, this means mov­ing to or adding a high-de­ductible health plan, usu­ally with a health sav­ings or health re­im­burse­ment ac­count at­tached to it to pay for el­i­gi­ble med­i­cal ex­penses.

“That was go­ing on be­fore health­care re­form,” said Melissa Ras­man, le­gal and ben­e­fits con­sul­tant and se­nior prin­ci­pal at man­age­ment con­sult­ing firm Hay Group. “But it’s in­creased be­cause of the Cadil­lac tax.”

Be­gin­ning in 2018, a 40% ex­cise tax— re­ferred to as the Cadil­lac tax be­cause it hits the more gen­er­ous health in­sur­ance plans—will be as­sessed on health in­sur­ance ben­e­fits ex­ceed­ing $10,200 for an in­di­vid­ual and $27,500 for a fam­ily. Al­though the tax doesn’t go into ef­fect un­til 2018, ben­e­fits con­sul­tants say that em­ploy­ers need to start plan­ning now.

“The larger or­ga­ni­za­tions are tak­ing a care­ful look and re­design­ing their plans to mit­i­gate the tax,” Wei­d­ner said. Any of the tech­niques em­ployed to re­duce cost of cov­er­age, she said, have the added ben­e­fit of help­ing com­pa­nies avoid fall­ing sub­ject to the 40% tax.

And there is no short­age, it seems, of ways that em­ploy­ers are seek­ing to cut health­care costs.

“It seems to me to be all over the board,” Ras­man said.

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