How U.S. employers offer, manage and deliver healthcare benefits is likely to change significantly down the road, according to a new survey.
Aon Hewitt’s latest survey indicated that the amount employers spend on healthcare has increased by 40% in the past six years to approximately $8,800 per employee. Over this same period, employee premium and out-of-pocket costs have increased 64% to almost $5,000 per year. Aon Hewitt estimates that healthcare costs for both employers and employees will continue to rise 8% to 9% per year for the foreseeable future.
Ninety-four percent of those surveyed will continue to offer employees health benefits in the next three to five years. But of that 94%, almost two-thirds plan to move away from a traditional “managed trend” approach to one that requires plan members to take a more active role in their healthcare.
“The healthcare marketplace is becoming increasingly complex. New models of delivery, new approaches to managing health and new compliance requirements are challenging employers to think differently about their role in ‘owning’ health insurance responsibilities for employees and their dependents,” said John Zern, executive vice-president and the Americas health and benefits practice director with Aon Hewitt.
“Employers are staying in the game, but they are taking bold and assertive steps to achieve more effective results—and they are doing so at a faster pace than we’ve seen in prior years.”
Pay for performance
Almost 40% of employers expect to move toward a “house money/house rules” approach over the next three to five years. Under this model, employers may reserve a portion of their healthcare dollars for those employees who show good health behaviours or who can show progress toward their health goals (e.g., taking a biometric screening).
Other employers may waive prescription drug co-pays if an employee shows he or she is following the doctor’s orders regarding a chronic condition.
“Over the past decade, employers have reserved an increasing portion of their cash compensation program to pay-for-performance bonus programs,” said Zern. “We see similar approaches emerging with health benefits.”
Private healthcare
Private healthcare exchanges (in which employers continue to financially support health insurance but enable employees to choose from multiple plan options and insurance carriers) are quickly generating interest among employers.
According to the survey, about 28% plan to move into a private healthcare exchange in the next three to five years.
“Private healthcare exchanges allow employers to re-create a competitive marketplace for health insurance based on consumer choice, which will encourage insurance companies to drive the system toward greater efficiency,” said Jim Winkler, chief innovation officer for the U.S. health and benefits practice with Aon Hewitt.
“While this option may not be a fit for every employer, it is increasingly attractive to those organizations that want to offer employees healthcare choice while lowering future cost trends and lessening the administrative burden associated with sponsoring a health plan.”
Exiting healthcare
Despite these possible changes, employers don’t see the individual insurance market surpassing or replacing the employer-based system any time soon.
Only 6% of respondent said they plan to exit healthcare completely in the next three to five years.
“The allure of exiting completely is strong until you look at the numbers,” said Winkler. “Between the Affordable Care Act penalties for failing to offer coverage and the ensuing talent flight risk, most employers believe they need to continue to play a role in employee health, but want a different and better outcome.”
Aon Hewitt surveyed nearly 800 large and mid-size U.S. employers covering more than seven million employees.