The Healthcare Treds Institute issued a massive survey of employee benefit trends. The good news is that employers are looking to insurance brokers and benefit consultants to help them evaluate health benefit designs and distribution models. Forty percent of employers say they will depend on insurance brokers to learn about new health benefit models, such as defined contribution plans and private exchanges, and 31% will depend on benefit consultants. Nearly 40% rely on insurance brokers to learn about health benefit designs and platforms.
“The ACA has created a dynamic marketplace in which brokers have a front row seat navigating in this new era,” according to the study. Human resource professionals have new responsibilities due to the ACA. Thirty percent are looking for help from benefit consultants. However, 30% are researching independently compared to 26% in the previous year. Employers gave the following answers to this question, “What partners would you depend on to help you learn about new health benefit designs and distribution models?”
- Insurance broker 39.7%
- Will research independently 30.8%
- Benefit consultant 30.8%
- Insurance carrier 24.4%
- TPA 19.2%
- None 15.4%
- Trade Association 11.5%
- Payroll company 10.3%
- Other 5.1%
What Benefits Employers Are Offering
About 40% of employers offer three or more health plan options, which are usually a PPO, an HDHP, and an HMO. Employees are choosing HDHPs (39%) over HMOs (35%). The following is a breakdown of benefits that employers offer:
- PPO 59.5%
- Flexible spending account (FSA)59.5%
- Health savings account (HSA) 52.1%
- High deductible health plan (HDHP) 38.8%
- HMO 34.7%
- Self-insured plan 22.3%
- Health-reimbursement arrangement (HRA) 15.7%
- Catastrophic insurance 8.3%
- Dental plan 73.6%
- Vision plan 67.8%
- Prescription drug coverage 67.8%
- Mental health coverage 52.1%
How Healthcare Reform Has Affected Employee Benefit Packages
Forty-nine percent say that healthcare reform will increase employee cost-sharing; 39.6% say it will increase premium contributions, and 3.6% say it will shift their company towards a defined contribution plan. Employee cost-sharing has risen every year for 10 years. Employers and the medical industry have had to deal with other ACA implications, such as the employer mandate and new compliance, which has caused an increase in capital and human resources. Employers have done the following in response to health reform:
- Increased employee cost sharing 49%
- Has had no effect 30%
- Enhanced wellness/preventive health programs 23%
- Increased employee engagement in their health 19%
- Increased employee engagement in reducing healthcare costs 18%
- Adopted new wellness/preventive health programs 17%
- Reduced covered benefits 15%
- Added HDHPs/CDHPs 14%
- Stopped offering healthcare benefits 9%
- Shifted to a defined-contribution plan
The Cadillac Tax
The impending 2018 Cadillac Tax is a prevalent challenge for employers. The ACA 40% excise tax will be imposed on the portion of group health plan premiums that exceed specified thresholds. The concern may be more regional since it could be triggered in parts of the country where healthcare costs are high and less likely to be triggered in parts of the U.S. with below average healthcare costs. Thirty-five percent of employers are very concerned about the 2018 Cadillac Tax; 25% are somewhat concerned; and 30% are not concerned. Sixty-one percent are making no changes to their benefits in light of the impending Cadillac tax while 18% have changed plans to avoid the Cadillac Tax. Recent news reports along with lobbying efforts may be influencing the 61% of companies who have a wait and see approach about the Cadillac Tax.
Defined Contribution Plans
Employers continue to learn more about defined contribution plans and private exchanges with about 35% saying they are familiar with them. This is an increase of about 5% over last year. Twenty-eight percent say that exchanges help employees understand the value of their benefits. Twenty-five percent say that a defined-contribution plan would help employees understand the value of their benefits and make more cost-conscious benefit decisions.
Five percent of employers offer defined-contribution plans (not on a private exchange) while same offer defined-contribution plans on a private exchange. Also, 7% are considering offering a defined contribution plans on a private exchange while 53% have not explored defined contribution plans.
Fifty-five percent of employers who are considering a defined-contribution plan, say they would explore the option for 2017 or 2018. This suggests that near-term adoption will be gradual. But the adoption curve may steepen as the benefits of defined-contribution plans become better known.
Employers want private exchanges to provide many solutions including health spending accounts (62%), carrier integration (58%), COBRA compliance (56%), automation of premium payments (51%), and payroll integration (50%). Employers choose private exchanges to control costs and increase employee choices, which is why employers say, most often, that they are looking for health spending accounts. Incorporating consumer directed healthcare coverage, such as HDHPs, HSAs and HRAs, helps private exchanges create a competitive marketplace that promotes cost-savings for employees and employers.
To succeed a private exchange needs to provide broad choices and help participants in the selection process. Sixty-two percent of employers say that it is somewhat important to very important to have health-spending accounts in an insurance exchange. Also considered somewhat important to very important are carrier integration (59%), COBRA compliance (56.4%), and premium payment automation (53%). Employers say they would choose the following offerings in an exchange:
- Plan and cost comparison tools 80%
- Online capabilities 69%
- Combined benefit enrollment 47%
- A help line 47%
- Transparency solutions for treatment cost comparisons 45%
- Mobile applications 45%
- Progressive cost tracking tools 35%
- Consolidated employer billing 35%
- Integrated consumer healthcare accounts 30%
- Financial account options 28%
Employers rank several exchange features as important, such as being a private exchange instead of a public exchange (83%), having a large selection of plan choices at targeted benefit levels (58%), and being provided by their broker or benefit consultant (55%). These findings indicate that broad choice is more important than who runs the exchange (broker versus carrier).
Wellness programs continue to gain interest as 35% of employers have initiatives in place compared to 30% last year. Another 22% are considering implementing a program. Sixty-five percent are considering adopting a wellness program in 2017, and 16% are considering adopting one by the end of 2016.
Fifty-five percent of those offering wellness programs, offer an employee-assistance program (EAP); 53% offer flu shots or vaccinations; and 37% offer a smoking cessation program. The disease management tools that most employers offer are for diabetes (30%) and depression or other mental health (30%). Fifty-four percent of employees are not offering disease management tools. But 30% are providing services for diabetes and mental health conditions. To promote positive health outcomes, 44% of employers offer at least one wellness program; 31% offer biometric screening; and 20% offer a disease management program.
Forty-four percent have at least one wellness initiative in their workplace. Employers that are interested in offering wellness plans should consider how it would affect productivity, absenteeism, turnover, retention, and recruitment, according to the survey authors. Including these factors in the ROI discussion can help demonstrate additional savings a company could achieve.
When it comes to wellness incentives, HSA and HRA contributions (18%) and premium reductions (16%) are most popular. Companies are split on whether to offer wellness incentives with 58% not providing rewards to employees and 42% offering some type of incentive in varying monetary amounts to participate. The value of the incentives remains relatively modest. Companies interested in wellness incentives can use the ACA as a guide. Eighteen percent offer $250 or more of incentives to employees for health-related tasks. Common values of incentives are $101 to 250 and $1 to $50. For more information, visit www.HealthcareTrendsInstitute.
How the Affordable Care Act Challenges Insurers
In the past year, the Affordable Care Act (ACA) has had a more pronounced effect on large and small health insurance carriers, according to an A.M. Best report. The fact that the enrollment population continues to be older and riskier, is having a bigger negative financial effect than anticipated.
Publicly traded companies fared well, reporting an increase in earnings through Sept. 30, 2015. The ACA health insurer fee has affected insurers’ earnings. It was $11.3 billion in 2015 and is a similar amount for 2016. Since the fee is not tax-deductible, it has a greater effect on net income. Many insurers have compensated for the fee through premiums. Since some government-funded programs are more sensitive to premium increases, carriers have not been able to consistently pass the fee along in rates.
To alleviate the growing financial pressure, health insurers are looking at initiatives to control the cost of care, such as disease management programs and better care coordination. As a result, there has been increased collaboration with providers that can benefit all parties involved, including the patient.
Merger and acquisition activity accelerated in 2015 with several large transactions announced during the year. The desire for further diversification is driving the mergers and acquisitions among insurance companies and other health-related businesses. A.M. Best’s outlook for the U.S. health insurance sector was recently revised to negative from stable, largely due to earnings and capitalization pressures as a result of the ACA. The industry pressures are expected to continue to hurt earnings. The lower earnings and growth in premiums from increased membership will result in lower levels of risk-adjusted capitalization.
The merger and acquisition activity will bring additional earnings pressure to the bigger carriers since they will need to service higher debt loads. Since many of these pressures will not subside in the near term, A.M. Best says that there could be more negative rating actions on health insurers.
The report also explores other trends, such as how health insurers are viewing cyber risk, changing consumer demands, emerging member-focused insurers, rising pharmaceutical costs, and 2015 rating trends. To get a copy of the report, visit http://www3.ambest.com/bestweek/purchase.asp?record_code=246597.
Premium Lens Brands Make Plans More Competitive
Employers have long assumed that offering a generous frame selection as part of a vision benefit package is important to their style-conscious employees. However, new research suggests that employees’ definition of stylish eyewear extends to lens choice as well. Wakefield Research conducted the 2016 annual Employee Perceptions of Vision Benefits survey for Transitions Optical. The study reveals that 58% of employees said brand name frames define stylish eyewear, but lenses are not far behind; with 39% identifying lens color and tint, and 30% citing lens technology. Further, 90% of employees agree that a vision plan offering coverage of premium brands and lens materials helps them select stylish eyewear, and an equal percentage agreed that a vision plan is more competitive if it covers premium lens brands.
Despite the overwhelming majority who look for plans that deliver premium benefits, 26% say they are uninformed about the lens materials covered by their employer-sponsored vision plan. “The optical industry continues to meet consumer demand and move toward a more fashion-focused offering. However, if consumers are unaware of their full range of eyewear options available to fit their style, they won’t see the value in their vision plans – and will be left unsatisfied,” said Drew Smith, associate director, North America channels, Transitions Optical.
The majority of employees are satisfied with the coverage of high-end frames and lens brands through their employer-sponsored vision plans. But for those who are dissatisfied with their options, the research shows that a significant contributing factor is limited frame and lens choice. Nearly 60% of employees who say they are prevented from making their desired eyewear purchase, attribute it to an insufficient selection of frames and lenses. Likewise, among those whose frame allowance did not allow them to select eyewear that fits their personal style, more than 39% said it was because they felt they had a restricted frame choice.
“The findings suggest that employers could improve the appeal of vision benefits by ensuring plans offered to employees deliver excellent coverage of premium lens brands and frames, and that they take extra effort to ensure employees are aware of this coverage,” said Jonathan Ormsby, strategic account manager, Transitions Optical.
Vision benefits remain a popular election among employees, with eight in 10 choosing to enroll in employer-sponsored plans. In fact, according to a year-over-year comparison of the Transitions Employee Perceptions of Vision Benefits surveys, vision is the only benefit to experience increased enrollment; all other standard offerings (medical, dental, life, 401K programs) saw slight decreases compared to 2015. After medical, vision insurance tied with dental as the second most popular election, due to the growing number of employees enrolling. It is the first time throughout Transitions Optical’s history of surveying employees, that vision benefits ranked as the second most popular election.
Seventy-seven percent of those enrolled in a vision plan have used it to pay for all or part of a comprehensive eye exam for themselves in the past year. However, utilization varies among generations. Millennials are the demographic group most likely to take advantage of their vision benefits. Nearly 30% of employees aged 18-34 used the vision benefits more than once to pay for an eye health appointment in the past year, compared to 18% of Gen Xers and 17% of Baby Boomers.
For more information, visit HealthySightWorkingforYou.org.
Short-Term Cash Incentives Are Popular
The vast majority of employers use incentive-based pay to recruit, motivate, and reward employees, according to a study by WorldatWork and Vivient Consulting. According to the Center on Executive Compensation. The following are key findings:
Private, for-profit Organizations:
- Short-term incentives decreased slightly among these employers to 94% in 2015 from 97% 2013.
- Long-term incentives also decreased slightly to 53% from 56%.
- In 2015, almost 75% of privately held companies with a short-term incentive plan offered at least three programs.
- Annual Incentive Plans (AIPs), the most prevalent short-term incentive plan at private companies, are offered to employees at the exempt, salaried level and above at most employers.
At the 75th percentile, the majority of private companies increased their short-term incentive budgets to 12% of operating profit in 2015. They forecast an increase to 14% of operating profit for 2016..
- In 2015, more than 75% of nonprofit and government employers offered three or fewer short-term incentive plans.
- While government incentive-pay budgets remain modest, nonprofit budgets have increased significantly. Nonprofit, short-term incentive budgets are starting to approach the levels reported by the private, for-profit employers.
- More than 80% of nonprofit and government employers say their AIPs are effective at achieving their objectives.
- 65% of the nonprofit/government employers with AIPs say the programs are used to reward employees while 62% use the incentives to focus employees on organizational goals.
For more information, visit www.WorldatWork.
Assurant Completes Sale of Employee benefit business
Assurant closed the sale of its employee benefit business to Sun Life for about $940 million. Alan B. Colberg, president and CEO of Assurant said, “The sale of Assurant Employee Benefits marks an important achievement in our multi-year transformation to build a stronger Assurant as we continue to sharpen our focus on risk management solutions for the housing and lifestyle markets.” The sale will generate about $1 billion of net proceeds inclusive of capital releases, subject to regulatory approvals, during 2016. The sale is structured as a combination of reinsurance agreements and sale of certain legal entities and assets.
Voluntary Short-Term Disability
The MetLife Worksite Short-Term Disability Plan provides a simple income protection solution that is easy to understand, enroll in, and use. The plan is 100% employee-paid. Features include guaranteed issue coverage, the ability for employees to pay for coverage via payroll deduction, and auto-portability, so the employee does not need to fill out forms to keep the coverage when changing jobs. For more information, visit www.metlife.com.