Consumerism Coming to Companies' Health Care Plans
While large employers at the annual National Business Group on Health conference last week grappled with uncertainty around health care reform and its impact on their bottom line, one thing was clear: Employees will be asked to do more to keep costs down by staying healthy and becoming savvier consumers.
"No one gets out of being a consumer at TE," says Erin Felter, director of U.S. benefits for TE Connectivity, a Berwyn, Pennsylvania-based electrical manufacturer formerly known as Tyco Electronics Corp.
Felter was on a panel titled Opportunities and Challenges for Consumerism and Health Accounts under the ACA, which is the shortened acronym for the Patient Protection and Affordable Care Act. Despite efforts to get the company's approximately 100,000 employees to enroll in its high-deductible plan, about 70 percent chose a preferred provider organization, or PPO, plan.
"70 percent of our employees were in the wrong plan," she says. Only 2 percent chose the consumer-directed plan even though it offered greater value. "Employees are paying 50 percent more to be in a PPO. No one should be in a PPO."
Her frustration over getting employees to take more responsibility for their health care was echoed by many conference goers and supported by the recently released 2012 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care that shows a growing number of employers are taking a carrot-and-stick approach to changing employee behaviors.
According to the survey, 61 percent of employers now offer financial rewards to workers who participate in wellness programs, such as health screenings and smoking cessation classes, and to influence better health outcomes, compared with 36 percent in 2009. And 20 percent are using penalties—such as insurance premium or deductible increases—if employees choose not to make healthy choices, like smoking or not completing a health management program. That figure will likely increase in coming years.
And a growing number of companies are introducing high-deductible insurance plans that are often coupled with a health savings account, or HSA, giving employees more discretion over how they spend their health care dollars. Enrollment in these account-based plans has nearly doubled in the past two years from 15 percent in 2010 to 27 percent this year, according to the survey. Fifty-nine percent of companies have a high-deductible plan and another 11 percent expect to add one in 2013, the survey of 512 employers showed.
Consumer-driven plans have high deductibles and lower premiums and can save companies and healthy employees money, but critics argue that those with chronic conditions might not be able to afford the care they need. To encourage enrollment in these plans, some employers contribute to employees' HSAs.
"There's less of a willingness to pass through a defined health care benefit and more acceptance of the idea that we need employees to make healthier choices," says Helen Darling, executive director of the NBGH, a trade association of large employers. "We're just not going to keep paying endlessly without expecting the employee to do everything they can within their control to make their health better. If you look back 10 years, the idea that employers would be at this place would have come as a huge surprise. They would say, 'Our job is just to pay the bills.' But that's changed completely."
Tom Billet, a senior consultant at Towers Watson & Co. says that in the past few years "companies have gotten more aggressive" about using financial rewards and penalties to get employers to take more responsibility. They've moved beyond cost sharing through higher deductibles and are focusing on changing behaviors through rewards and penalties to get employees to undergo health-risk screenings and visit their doctor regularly. Those with chronic conditions are now expected to manage them effectively.
Billet says that incentives and deterrents are flipsides of the same coin. "You can position a smoking surcharge in two ways: On the one hand, you can tell employees, 'You'll pay more if you're a smoker,' or you can say that 'You'll get a discount if you don't smoke.' How you approach it depends on the company's culture."
In an effort to help employees make better health care spending choices, a growing number of employers plan to share cost information with their workforce. "It is a well-understood fact that health care does not function as an efficient market because consumers do not know price and quality before they purchase a service such as an MRI or mammogram," the survey says.
Today, 15 percent of employers provide employees with price information and another 22 percent plan to do so next year. Also, more than one-third of companies require vendors to share claims data with employees.
"Employees need to be savvier consumers," Billet says. "That's most easily done at the point of seeking care. You can decide when to see your doctor and about what kinds of conditions. The second level down is deciding what sort of provider you need to see—a specialist vs. a primary-care physician. And the third and least easily done level of decision-making is based on price and quality. At the moment there's not a lot of transparency out there."
Despite these obstacles to improving health care consumerism, employers are committed to staying in the employee benefits business, at least for now. While most employers remain focused on improving their health plans through 2015, long-term confidence that they will continue to offer health benefits is low. According to the survey, 23 percent "are confident that they will continue to offer health care benefits for the next 10 years down from a peak of 73 percent in 2007."
"The difference is health reform and the passage of health care exchanges," says Billet, referring to the establishment of state health care exchanges in 2014. An exchange is a marketplace where people who are not covered by their employer will be able to purchase affordable health care insurance. "A lot of companies are saying that, in the short term, 'Yes, we're committed,' but in the longer term they are saying that they're less committed because there will be an alternative."