Employers Expect To Continue Health Insurance, But Costs Are A Key Concern

While more than half of employers recently surveyed about health care reform provisions say they will maintain their health plans, one-third don't know what they will do in 2014 when new state exchanges start operating.

The amount of indecision, a need for employers to look for ways to lower group health plan costs, and struggles for small insurance agencies in tackling compliance questions are all factors that open up opportunities for large insurance brokers like Willis, which developed the survey.

Willis' national survey of a cross-section of more than 1,000 businesses aimed to get a better understanding of employers' plans and expectations as the mandates of the Patient Protection and Affordable Care Act take effect. Willis, partnering with Diamond Consulting, also asked employers what concerns them as the law takes effect.

The survey, "Health Care Reform 2010 Survey," released Nov. 10 by Willis, covered 1,400 businesses comprising more than nine million covered employees in companies of various sizes and varied industry sectors from different regions of the country. Those surveyed were asked how they feel about the health care reform act, how they believe it will affect them, and how prepared they are.

Fifty-five percent of employers said they would continue to maintain their health plans in 2014 when state exchanges are scheduled to go into operation, while 33 percent said they do not yet know what they will do.

A total of 88 percent of respondents believe that group health plan costs will increase as a result of the PPACA mandates. Seventy-six percent said they believe administrative compliance costs will increase.

As a result, 72 percent of respondents said they plan to increase employee contributions to attempt to offset the impact of higher administrative and premium costs.

Surveyed employers indicated they would consider using one or more options to maintain plans, including: passing on more costs to employees; decreasing ancillary benefits, such as dental and vision benefits; or in some extreme cases, eliminating benefits completely.

Willis also reported:

o The adult child coverage mandate that becomes effective for most plans on Jan. 1 is expected to increase the cost for health care plans by 1 percent, according to 53 percent of those surveyed.

o More than half of the respondents noted a lack of clear understanding concerning the availability and eligibility for the Wellness Credit and Small Business Tax Credit.

o Fifty-two percent of survey respondents anticipate an increase in the number of employees covered under employer-sponsored benefits.

The report notes that "a majority of respondents felt that employers would generally not accept lowered profits on account of the Health Care Reform legislation. This will likely result in employers looking for ways to offset any resulting cost increases."

Mike Barton, chairman of Willis North America Human Capital practice, said the purpose of the survey is to understand employers' view of health care reform.

"The overall feedback we heard from employers is that this is costly. In their view, this will increase their price tag for health care delivery, not decrease the price tag," said Mr. Barton, adding that the finding is not surprising.

For employers, he said the major concern is not who pays for health care, which he said is the primary focus of the legislation, but controlling the increasing costs of health care. "It's a complete whiff," he said, using a baseball analogy to suggest that the legislation misses the mark.

"The 'what you pay' issue is what employers should be focusing on," Mr. Barton continued, adding that the whole cost issue is not helped by health care reform but hurt. When the majority of those polled believe that their cost will be increased, and reform doesn't address the cost issue, the real issue for employers is "how do you manage cost. And this hasn't changed for decades in America."

For Willis, Mr. Barton said that dealing with this issue is dealing with the demand for health care, and that means addressing the cultural issues that drive health care costs.

There are three things driving that demand–what you eat, how you exercise and unhealthy habits, such as smoking, he noted.

So what should clients be seeking to do to control those costs?

"Anything they can do to support a behavior change, behavior modification, with their employees and their family members around better diet, more exercise and stopping unhealthy health habits," said Mr. Barton.

"Everything that we are doing is designed to help employers support a culture of health," he continued. "It's message. It's tools and resources."

Doing its part, the firm has built a website named Winning With Willis (www.winningwithwills.com), a publicly accessible portal to help the public find answers about many health subjects with links to the Center for Disease Control website.

The aim of the site, said Mr. Barton, is to speak directly to employees and family members about health issues and to make it easier to get that information.

The firm also utilizes a Health Care Reform Calculator that can determine the cost of reform tailored to the individual situation of a client. Willis generates a report to help clients determine the cost of implementing different aspects of the reform program.

For years, employers and employees have thought of health benefits as an entitlement they receive for employment, observed Mr. Barton. The benefits that companies offer have not changed in the more than 20 years he has been in the business, he said. Willis is working with its clients to change that mindset to a reward- based system where employees receive a base health care plan, but if they become active participants in their health, they receive greater benefits.

"Every employer has drawn a line in the sand and said I can't take much more of this," said Mr. Barton. "The idea is to reward someone who is taking an active role in their health care with a different style of benefit."

He admits that while the chief executives love the plan, employees are initially resistant and it can be a rocky program for the first year. But by the second and third year "they totally get it," he said.

Another major worry among clients relates to compliance issues, which he said can be confusing and require the help of a broker to keep everything in place. Willis, he said, is spending a lot of time and energy answering those compliance questions and advising clients appropriately.

While Willis has the resources to invest in doing this due diligence work, smaller agencies can't keep up, he acknowledged. Recognizing this, the human capital practice has partnered with smaller agencies to lend them support.

Some of these partnerships could lead to acquisition if it is strategically in Willis' interest, but many are not, Mr. Barton noted. Still, agencies are coming to Willis for help and the firm is opening its resources to them.

Agencies now find they are in need of some support as a result of the act, Mr. Barton explained. "The question becomes do you invest a lot of money and buy all these agencies, or do you make a low capital investment where you partner and support?"

"We want to get into that space," Mr. Barton said. "We want to help. We do have an appetite for it. We believe we can help… through what we are calling a commercial network strategy, where we can partner with [agencies] and share some of our resources and help them get over the hump for some sort of revenue-sharing exchange. That is absolutely on our radar screen."

The agencies, the Mom-and-Pop-type firms, understand, and their clients understand, that they are being overwhelmed with the health care reform issues. And the relationship Willis has built with these agencies is saving their businesses, he said.

"We are not out to steal their business. They see us as the white knight that is saving their family business," Mr. Barton said.

"We are a company that has a conscience. And, we are a company that has a blue-collar personality," noted Mr. Barton. "We like to roll up our sleeves and come to work," he said.