Towers Watson
Health Care Changes Ahead Survey Report
Towers Watson Projects Employer Health Care Costs Will Increase
5.3% in 2013; Employers Remain Committed to Health Care Plan
Sponsorship
NEW YORK, August 27, 2012 — Following the U.S. Supreme Court
decision on health care reform, most employers (88%) have affirmed their
commitment to offer health care benefits to their active employees for the
foreseeable future, according to a survey of 440 midsize to large companies by
Towers Watson (NYSE, NASDAQ: TW), a global professional services company. This
strong commitment (up 17 percentage points from 2011) comes despite a projected
2013 per employee health care cost of $11,507, an increase of 5.3% from 2012. It
also comes amid uncertainty relating to the November elections, development of
insurance exchanges and the rapidly evolving health care delivery system.
gWhile the most significant changes mandated by health care reform will not
occur until 2014, it is essential that companies develop a strategic response
and prepare for these changes well in advance of then,h said Ron Fontanetta,
senior health care consulting leader at Towers Watson. gThese changes will have
a profound impact on the way health care is delivered and how many individuals
acquire health insurance, most notably retirees.h
Although the rate of health care cost increases has slowed (5.3% projected
for 2013 compared with an expected 5.9% this year), a majority of employers
(58%) expect they will trigger the health care reform excise tax* in 2018 if they do not make changes to their
current benefit strategy. As a result, 83% of employers are planning to take
steps to control their costs to avoid the tax. The $11,507 total cost represents
an employer cost of $8,911 per employee and an employee cost of $2,596 per
employee. While the overall increase in employee cost sharing is modest, it is
meaningful to employees, as it outpaces average merit increases.
The actions and programs that companies are planning or considering include
changing plan options (63%), significantly reducing subsidization of coverage
for spouses and dependents (38%), and using spousal waivers or surcharges (29%).
Additionally, some employers will pass along a greater percentage of costs to
employees. Thirteen percent plan to increase their employeesf share of health
care of premiums in 2013 by five percentage points or more, while 42% plan to
increase employeesf share by one to five percentage points.
gAffordable health care remains a top priority for employers and a key
component in employee value propositions,h said Randall Abbott, senior health
care consulting leader at Towers Watson. gHowever, due to the increasing costs
of medical benefits and the additional burden of compliance, business leaders
need to keep the pressure on to control costs, increase workforce accountability
and engage workers to lead a healthier lifestyle.h
Other notable trends and data points from the survey include:
- More than three-quarters (77%) view health care benefits as core to their
employee value proposition over the next several years, and more than
one-third of companies will examine their health care benefits in a total
rewards framework by 2013. Another 39% are considering doing so by 2014 or
2015.
- The strong growth of account-based health plans (ABHPs)** is
expected to continue. By 2015, 80% of employers plan to offer an ABHP, up from
61% in 2013. The enrollment within ABHPs continues to increase significantly,
moving from single-digit numbers in 2006 to an expected 30% for employers
offering these plans in 2013.
- Health care delivery continues to evolve, which is leading to the
acceleration in use of telemedicine services. Seventeen percent plan to offer
telemedicine by 2013, and another 27% are considering offering it by 2014 or
2015.
* Excise tax: According to the Patient Protection and Affordable
Care Act, the federal government will impose an excise tax of 40% on insurers of
employer-sponsored health plans, including self-insured employers, with an
aggregate value of more than $10,200 for individual coverage and $27,500 for
family coverage.
** Account-based health plans: A plan with a deductible offered
together with a personal account (health savings account or health reimbursement
arrangement) that can be used to pay a portion of the medical expense not paid
by the plan. Account-based health plans typically include decision support tools
that help consumers better manage their health, health care and medical
spending.
About the Survey
The 2012 Towers Watson Health Care Changes Ahead Survey offers insight into
the focus and timing of U.S. employersf planned response to the Patient
Protection and Affordable Care Act in the wake of the U.S. Supreme Courtfs
announcement that it is constitutional. The survey was completed by 440
employers during July 2012 and reflects respondents 2013 – 2015 health care
benefit decisions. The responding companies comprise a broad range of industries
and business sizes, and collectively employ 6.6 million employees.
About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services
company that helps organizations improve performance through effective people,
risk and financial management. The company offers solutions in the areas of
benefits, talent management, rewards, and risk and capital management. Towers
Watson has 14,000 associates around the world and is located on the web at www.towerswatson.com.