Healthcare Purchasing Power Survey shows employers getting workers more involved in drive to trim expenses
Large corporations are asking employees to shoulder greater responsibility for their healthcare costs and overall wellness, according to companies surveyed as part of Modern Healthcare's annual look at health benefits programs.
The fifth annual Healthcare Purchasing Power Survey collected data from 31 large corporations, which shared information on the beneficiaries they're covering, their healthcare expenditures and the types of health plans they're offering.
The results show that as healthcare costs have continued to rise, companies are looking for ways to increase employee involvement in managing their healthcare expenditures, whether through consumer-directed health plans or healthy-living incentives.
Respondents to the survey represented a number of industries, and included familiar names such as General Electric Co., railroad giant Norfolk Southern Corp. and luxury goods maker LVMH.
The survey also provided a glimpse into how hospital operators are covering their own employees. Nearly two-thirds of respondents are healthcare services companies, including Catholic Health Initiatives, HCA and post-acute-care operator Kindred Healthcare.
Modern Healthcare invited survey responses from companies that have at least $100 million in annual revenue, and 26 of the responding companies reported revenue of more than $1 billion in their fiscal 2011.
While the survey doesn't aim to be a representative sample of the country's employers, it does offer a snapshot of how respondents are thinking about their healthcare purchasing decisions—from how their costs have changed to what they're doing to save money.
And healthcare coverage did not come cheap last year. For the 30 companies that provided two years of data, healthcare expenditures averaged $135 million in 2012, increasing roughly 8%, compared with $125 million in 2011.
They also spent more money per beneficiary, with respondents reporting that their cost per covered life increased about 3.9% to $4,092 in 2012 from $3,939 the previous year.
Twenty-four respondents saw their costs per covered life increase from a high of 44.8% at Tower International to a more negligible 0.4% at BJC HealthCare and Spectrum Health.
Yet six respondents saw a decrease in the cost per covered life, the most significant of which was at Arthur J. Gallagher & Co., which cut its per-member costs by nearly 50%. The Itasca, Ill.-based property and casualty insurance brokerage firm declined to comment on the change.
Most of the respondents, or 24 companies, assumed the risk for their own healthcare costs, maintaining self-insured group plans.
The results correspond to trends employee benefit consultants say they are seeing across the country—with a greater interest than ever being placed on containing costs and incentivizing employees to do the same.
Nationally, employers are budgeting for a 6.5% increase in 2013 healthcare costs, which would be similar to what they've seen over the past few years, says Kristen Stagaman, a principal at human resources consulting firm Mercer.
Healthcare costs rose 6.1% in 2011 and are projected to increase 5.7% for 2012 when the final numbers are tallied. Yet Mercer's data found that employers are actively working to hold down costs, reporting that if they had made no changes to their plans, they would have been looking at cost increases closer to 8%.
Stagaman notes that 58% of employers plan to shift more costs to employees, and are particularly looking at the added costs to cover dependents now that children can stay on their parents' plans until age 26.
But Dave Garratt, senior vice president of health and benefits at human resources consulting firm Aon Hewitt, notes that companies are also looking at other ways of managing costs, such as targeting “heavy utilizers” of healthcare—those with chronic conditions—and weighing various alternatives for covering the additional dependents on their rosters.
One option being considered is charging more for each additional dependent on a family plan. “That's not something that's been widely adopted, but it is being discussed,” he says. “There's still a movement to try to shift as much cost as they can to employees.”
A more enduring trend over the past few years has been the move to consumer-directed health plans as a way to encourage employees to take more responsibility for their healthcare costs.
PPOs remain the most popular health plans offered, but 32% of large employers also offered a high-deductible, consumer-directed health plan in 2011, Stagaman says. “Many employers are interested in offering these types of plans in the future,” she adds.
In Modern Healthcare's Healthcare Purchasing Power Survey, 15 companies (48%) indicated that they offered high-deductible health plans in 2011, with three respondents—General Electric, JE Dunn Construction Co. and Kettering Health Network—choosing that type of coverage as the only option.
Wheaton Franciscan Healthcare, Glendale, Wis., introduced a high-deductible option for 2013 after looking at the market and seeing that most of its competitors were similarly offering consumer-directed plans.
Veronica Baricevic, a vice president at the system, notes that high-deductible plans have the added benefit of allowing employees to put up to $5,000 in a health savings account, as opposed to $2,500 under a flexible spending account.
Wheaton Franciscan says it saw healthcare costs for its beneficiaries increase 12% between 2010 and 2011. While rising healthcare costs were one reason that it decided to add more plan options than just its HMO and PPO, Baricevic maintains that the high-deductible plan also allows it to keep pace with the market.
The system has also made changes to its other health plans that affect the co-payments or premium costs for its employees.
After its first week of open enrollment, Baricevic says about 5% of employees are choosing high-deductible coverage, which is in line with its expectations of 5% to 10%.
Garratt notes that account-based plans have allowed employers to lower their costs by about 2% compared with traditional offerings. And that's driving increased interest in adding or expanding that type of coverage.
“The vast majority of employers have rolled out account-based plans,” he says.
Land O'Lakes, St. Paul, Minn., was an early adopter of a high-deductible health plan in 2006, when it undertook a review of its health insurance options.
“We want to be competitive,” says Pamela Grove, the company's senior director of benefits and HR operations. “At the same time, we realize we have to control our costs and our spend.”
While the dairy foods company still offers traditional indemnity, HMO and PPO plans, it has been actively guiding employees toward its high-deductible coverage through a “robust” communications effort, Grove notes.
While the company expected enrollment to be about 30% in the first year of the plan's debut, the outreach effort led 72% of employees to choose the high-deductible option, Grove says. And Land O'Lakes has been able to maintain that momentum, with 83% of its employees now choosing high-deductible coverage.
Land O'Lakes is also among the employers that are offering wellness programs to help hold down healthcare costs. Its Destination Wellness program has been in place since it first introduced its consumer-directed health plan option, and Grove says the company is “continually enhancing wellness programs,” from smoking cessation to preventive care.
Aon Hewitt's Garratt notes that employers are moving “from a participation-based strategy to outcomes-based,” in terms of how they think about wellness.
At Wheaton Franciscan, the system is making a greater push to tie wellness incentives directly to employees' out-of-pocket health costs. Instead of cash or other awards for achieving health goals, employees in 2013 can earn wellness points that will reduce their insurance premiums, Baricevic says.
Richard Millard, senior director of the healthcare practice at market research firm J.D. Power and Associates, notes that employers have been looking toward health plans to take the lead on wellness, even though patients are more likely to trust the message coming directly from their primary-care doctors.
That's one reason why employers have expressed the most satisfaction with health plans that integrate physicians, he says, pointing to Kaiser Permanente, which scored highest this year in its health plan satisfaction study.
Modern Healthcare's survey also asked companies to report whether the Patient Protection and Affordable Care Act would have had an effect on their benefit programs. The vast majority of respondents, 27 companies (87%), reported that they saw no change in coverage options, while two companies planned to add coverage and two were unsure of the impact.
Mercer's Stagaman describes the past couple of years as the “calm before the storm,” since most provisions of the healthcare reform law go into effect in 2014.
J.D. Power's Millard notes that few large employers plan to drop coverage entirely, but 42% have expressed interest in directing employees toward health insurance exchanges.