Which decisions impact retiree coverage?
After reviewing the promises made to retirees, employers should revisit health plan designs in light of the new mandates. For example, it may not make sense to continue sponsoring a drug plan given the changes to Medicare Part D. These changes have already resulted in new accounting rules, closing the infamous ‘donut hole’ over 10 years, and new mandates that require manufacturers to offer a 50 percent discount on brand-name drugs and biologics in the donut hole. A three-year initiative to lower provider reimbursements through Medicare Advantage plans beginning in 2011 could diminish retiree participation and, possibly, plan availability, ultimately forcing an estimated half of retirees into more costly plans. Would offering Medigap coverage or a stipend be prudent now or in the future? Should employers continue to sponsor retiree coverage? These are just a few of the questions employers must answer.
Can employers mitigate some of the cost increases through strategic decisions?
Employers who proactively invest in wellness incentives will receive an extra boost in 2014 when the HIPAA limit is raised from 20 to 30 percent. The incentives become more powerful when combined with a decision to offer preventive services without co-pays or deductibles, which adds only half a percent to health care costs, but ultimately can yield a 5 to 10 percent increase in the number of people using preventive services, according to the U.S. Preventive Services Task Force. The final piece of the cost savings puzzle is helping employees to be wiser consumers of health services. The key decision is whether employers wish to hold employees accountable for their health management and to what degree. Other cost savings measures touted in the bill are wild cards. Will allowing carriers to sell insurance across state lines lower premiums? Will regulating insurers’ margins inspire employers to move away from self-insured plans? There’s only conjecture to consider when making decisions because the only givens at this point are cost increases.
What’s the biggest decision facing employers?
Certainly the introduction of the pay or play mandate might entice some employers with lower-wage work forces to pay the penalty and offer employees a wage increase to purchase coverage as state-run insurance exchanges come online. Considerations include the reaction from clients, competitors and, of course, current and prospective employees, who generally expressed anxiety about purchasing coverage on the open market in a recent survey by Towers Watson. However, 67 percent said they expected to pay more for health benefits in the future, so altering plan designs or total rewards to mitigate rising costs while continuing to offer group coverage might be a wise decision.
Ron Mason, CEBS, is a senior consultant for health and group benefits at Towers Watson. Reach him at [email protected] or (949) 253-5203. For more information about health care reform, visit www.towerswatson.com/health-care-reform.
