Trends in employee health benefits, not a pretty picture

If you look at this issue from an employee or retiree point of view get ready for:

• Less choice
• Higher out-of-pocket costs and greater cost sharing
• Less flexibility as to where you receive health care
• More management of the health care and services you receive

If you are an employer, here is where you are headed in health benefits:

• Universal use of High Deductible Health Plans and Health Savings Accounts (HSA). Among large employers this is likely to remain a choice among one or two alternatives. However, for employers with 3,000 and below employees the HDHP is likely to be the only choice within five years or less.
• Narrow networks, that is, smaller physician and hospital networks within a plan on the basis of higher discounts, but also higher quality from the participating providers – details on how to define that to follow (we hope)
• Greater use of carved out care management. That is, stronger management over prescription drugs, mental health care and even other areas such as radiology.
• While most large employers have it now, you will see an expansion of health advocates and nurse advice and help lines.
• Wellness and prevention will continue high on the list (even though any true ROI is questionable at best).

Take a step back and what do you see? You see much that is contrary to what was promised under the guise of health care reform. Employees will have less, not more choice, they may not be able to keep their doctor (without paying considerably more), their costs will go up, not down and someone will frequently come between them and their doctor.

To be clear, all this is not being caused by enactment of the Patient Protection Affordable Care Act. It is caused by one thing alone…the cost of health care and thus the cost of providing workers with health benefits. To be sure PPACA added to those costs for employer plans, but all of the above steps would have occurred nonetheless.

Employers are faced with limited choices; drop health benefits altogether, restructure the benefits as indicated above or move to a pure defined contribution approach whereby the employee receives a set amount each year to cover health benefits and any cost above that is the employee’s responsibility.

Few large employers will drop coverage, virtually all will embrace the above strategies and some (with the number growing as time passes) will take the third option. That third option, the defined contribution approach, will become more attractive and more feasible in 2014 when the health care exchanges are operational. Smaller employers especially will quickly see that providing each employee with a set dollar amount toward health benefits, and paying the fine for not offering coverage is a far better financial deal than continuing to provide coverage with uncontrolled costs and accompanying premium increases. Large employers may continue to offer various options, but also may see that a fixed contribution is the only way to control employer costs just as a 401(k) is far better at that then a defined benefit pension.

While all these strategies may save employers money, most are shifting costs to employees. Without some real way to manage the cost of health care, the burden on most people will become intolerable even with health insurance.

Where we are headed with health benefits cries out for one thing; a massive education and communication effort. When employees see what is happening to their benefits, to their shrinking freedom in seeking and receiving health care and to their wallet, it is not going to be a happy workforce. Employees must understand the issues and options, why changes are being made and what the real impact may be, and lastly the facts about whatever change is made. Communicating without all of these elements is not communications, it’s reporting.

To a great extent this health care cost mess we are in is income insensitive. That needs reassessment. Can we realistically expect a $40,000 a year worker to cope with these changes as well as one earning $100,000? Any kind of cost shifting, including high deductible health plans, disproportionally burdens lower-income workers. We can’t solve that problem merely by having income tiered premiums. For many it is the out-of-pocket costs that will break them.

Changes they are a coming and you will be affected. Cost is the culprit and unfortunately dealing with that cost requires a new view of the way we all receive health care and pay for it. If we are not willing to change, someone will make the changes for us. For now, it will be employers.

Related articles

• World of health benefits changing, executive says (knoxnews.com)
• High Deductible Health Plans are not the solution. It is not the patient who can manage health care. New study finds skimping on preventive care. (quinnscommentary.com)