Although the rate of health care cost increases is expected to remain stable in 2012, employers are taking more aggressive steps to manage their rising costs and improve employee health, according to findings from the 2012 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care. The survey was completed by 512 employers who work at companies with at least 1,000 employees and collectively employ 9.1 million full-time employees, and represent more than $87 billion in annual health care spending.

The survey found that total health care costs per employee are expected to rise 5.9% to $11,664 in 2012, compared to 5.4% ($10,982) in 2011. Employees’ share of costs increased 9.3% during this period to $2,764. This amount represents a 40% increase in costs from just five years ago, compared to a 34% increase for employers over the same time period. Retirees not yet eligible for Medicare can expect to pay an average of $4,226 per year for single only coverage and $10,500 for family coverage.

Many employers plan to make substantial changes to their health care benefits offerings because of these rising costs. Four in 10 employers say that developing a workforce culture where employees are accountable for their own health is a top health care strategy focus in 2013. One in four employers say the same about reviewing their overall mix of benefits. Many employers are also keeping their eye on staying up to date and complying with the Patient Protection and Affordable Care Act (34%).

“As employers try to maintain the balance between containing costs and offering competitive total rewards packages, they are realizing that their future health care benefits choices are not quite as simple as ‘paying or playing,’” says Ron Fontanetta, senior health care consulting leader at Towers Watson. “In fact, there is a wide spectrum of design choices that will allow employers to develop a health care strategy that matches their unique objectives and workforce demographics.”

The options, which range from continuing to discontinuing health plan sponsorship, include offering an employer-sponsored plan to only a portion of the population and providing employees with a defined contribution for use in health insurance exchanges. According to the survey, only 3% of employers are very to somewhat likely that they will discontinue health care plans for active employees in 2014 or 2015 without providing a financial subsidy. By the same measure, 45% of employers are very to somewhat likely that they will offer coverage to only a portion of their workforce and direct the others to exchanges.

While most employers will remain focused on sponsoring the design and delivery of their health care programs through 2015 (77%), they are much less confident that health care benefits will be offered at their organization over the longer term. Less than one in four (23%) companies are very confident that they will continue to offer health care benefits 10 years from now, down from a peak of 73% in 2007.

Companies today are continuing to expand their use of financial rewards to engage employees and their spouses to better manage their health. In fact, more than two-thirds of respondents offer incentives today. Respondents also indicated that they have become more willing to add penalties to their arsenal (used by 20% today), and some (10%) have even adopted achievement standards, which will likely continue to grow in use as companies increasingly hold employees accountable for unhealthy life choices, losing weight and lowering blood pressure.

"We haven’t had an era of such uncertainty in many years. What we do know is that employers still have to get up every day and do what they can to improve health care costs," NBGH President Helen Darling said today at a National Business Group on Health conference in Washington, D.C. where the group publicly released the survey results "The health and productivity of the workforce is key and having employer subsidies for both health insurance and health care is important. This is not a passive strategy; it’s a very active strategy." 

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