Reform Update: Employers plan to offer different coverage 'sizes'

A new survey of large companies suggests employers will keep finding ways to trim coverage costs while meeting their obligations under the healthcare reform law to offer a minimum set of benefits at an affordable cost.

Employers are projecting that they can limit their healthcare cost increases in 2015 to 5% if they make certain changes to the design of their health plans, according to a survey released this week by the National Business Group on Health. However, if they don't make any changes to their plans, those costs would rise by 6.5% next year, employers told the nonprofit association that includes nearly 400 large U.S. employers.

“One of the themes I saw is the effort of employers to put employees in the driver's seat as healthcare consumers,” said Karen Marlo, a vice president at the National Business Group on Health. They are also making efforts to prepare for and postpone the impact of the excise or “Cadillac” tax scheduled to take effect in 2018, Marlo said.

One surprising survey result found that one in six employers plans to offer coverage that doesn't meet all of the Affordable Care Act's requirements for value and affordability. Some interpreted the finding to mean that those companies would offer an ACA-compliant plan in order to avoid tax penalties, but would also offer a so-called “skinny plan” that most employees would choose.

However, that's really not the major finding, Marlo said—and it's also not entirely accurate, she added.

“When we asked the question 'Will all your plans meet the affordability requirement and minimal value test?' and people said no, it didn't necessarily mean catastrophic or barebones plans,” Marlo said. “I hate to jump to the term 'skinny plans,' because we didn't explicitly ask. We just know that they don't meet the criteria.”

Of the 136 corporations who responded to the group's June survey, 73% reported that they are adding or expanding consumerism tools, while 57% said they are implementing or expanding account-based consumer-directed health plans.

“Price transparency tools are a good idea. People ought to know what the services they're getting cost,” said Timothy Jost, a law professor at Washington and Lee University who specializes in consumer health. “If you're going to have high deductibles and high co-insurance, it really is terribly important that you have price transparency.”

That's especially critical, Jost said, as more costs are shifted to employees. In fact, 42% of survey respondents said they will increase employee cost-sharing in 2015. They are also placing more focus on wellness programs, with 53% reporting that they will add or expand incentives and disincentives to encourage employees to participate in programs focused on weight management, increased physical activity, tobacco cessation or stress reduction.

A plan often referred to as a “skinny plan" typically would cover preventive care but not much else, leaving employees on the hook for the bulk of their healthcare expenses. But because such plans are cheap, workers may sign up for them, protecting them from the individual mandate penalty. And if the employer also offers an ACA-compliant plan—even if no one signs up for it—the company is protected from the employer penalty.

“The plans may not meet one of these criteria, but it may be what the employees want or what they can afford at this time,” Marlo said. “A lot of employers are trying their best to provide healthcare coverage to their employees.”

It's an observation also seemingly supported by survey data. Only 1% of survey respondents said they would not offer spousal coverage, even though the ACA does not require that any employer provide spousal coverage.

“I think that's kind of indicative of what's going on with employers in that they are aware of the requirements of the ACA, but it's not the only thing driving their behavior,” Jost said. “In fact, I think it's still the case that the most important thing driving employer behavior is relationships with employees, employee retention, recruitment, satisfaction and productivity.”

Insurance premiums are typically higher in markets that are less competitive, according to a report released this week by the Robert Wood Johnson Foundation. In states dominated by a single insurance carrier, it is difficult for other players to enter the market and gain leverage with providers, resulting in relatively high premiums, the group's Urban Institute found. Conversely, in states with highly competitive markets, premiums are comparatively low. For example, the lowest silver premium for a 45-year-old in Rhode Island, which is dominated by a Blue Cross Blue and Shield plan, is $309.52. In Denver, where eight carriers offer coverage in the nongroup market, the lowest silver premium for a 45-year-old is $277.01, the report's authors said.

The picture of 2015 premiums for the individual insurance market is beginning to come into focus, as rate filings in 29 states and Washington, D.C., have been made available to the public. According to data compiled and analyzed by PwC's Health Research Institute, the insurance landscape for the next open-enrollment period is as varied as the geography of the states reporting the information. The average rate change among those states is 8.2%, with an anticipated premium drop of -23% in Arizona to an increase of 50% in Arkansas. Across these markets, the average monthly premium, calculated without subsidies, is about $385.

Follow Rachel Landen on Twitter: @MHrlanden