Employers are taking bold action to manage health care costs and offer affordable care according to the National Business Group on Health Survey  just released by Towers Watson. Over the past year, employers have focused their efforts on immediate compliance with health reform, but looking ahead to 2012 and beyond, many employers are pursuing bolder actions and implementing health program changes to hold employees and providers more accountable in the struggle to manage costs and improve worker health. The shift toward bolder health care benefit design decisions is being driven by continuing cost challenges and the anticipated effects of health care reform.

Employers expect average costs for active health care benefits to increase by 7% in 2011, up from a 6% increase in 2010. While increases have stabilized over the past few years, they considerably outpace wage increases year over year, continuing to place significant financial pressure on employees and their families. According to the research report, the total anticipated annual costs per active employee are expected to reach $11,176 (up 7.6% from $10,387 in 2010), and the average employee’s share of costs in 2011 is expected to rise 11.8%, to $2,660.

“We cannot continue to think that the rise in health care costs is sustainable. Health care costs have experienced dramatic cost inflation over the past two decades, and employers continue to subsidize the majority of plan costs,” said Helen Darling, president of the National Business Group on Health. “But these costs are cutting into employers’ profitability and the total rewards they are able to offer employees, plus concerns about the future Cadillac tax add a new level of urgency to their challenges. Employers that are best able to minimize this cost burden will be those that are able to provide the most competitive benefits package and attract the most talented employees.”

To mitigate costs and minimize the longer-term impact of reform, employers are redesigning health benefit programs to incorporate enhanced point-of-care consumerism, repositioning incentives to improve employee engagement, redefining their financial commitment to dependent and retiree coverage, and emphasizing use of high-value providers. Among the notable planned benefit design changes are:

• Dependent coverage subsidies: 68% are moving to increase contributions for dependents, with 19% targeting per-dependent contributions, and 35% using or planning to implement spousal waivers or surcharges.
• Retiree medical coverage: 26% of employers plan to cease employer sponsorship; 25% plan to convert a current subsidy to a retiree health account, and 23% plan to eliminate employer-managed drug coverage for post-65 retirees and rely on Medicare Part D plans.
• Incentives for high-value providers: 28% of employers plan to differentiate cost sharing for high-performance networks or centers of excellence in 2012, and 21% plan to adopt value-based designs over the next year. In addition, 18% plan to offer incentives or penalties to providers for coordination of care, use of emerging technologies or use of evidence-based treatments.
• Accountability for engagement: A third of employers plan to reward or penalize their employees based on biometric outcomes (for weight and cholesterol), compared with just 7% in 2011 and 6% in 2010. Social media is one of the emerging creative strategies employers (9%) are using to improve employee health and well-being.

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Source: News Release – Mar 10, 2011 Towers Watson