Health care benefits in 2015: What employers need to know
Editors note: This week, EBN runs a special series on what benefit decision-makers can expect in 2015 in five key areas: health care, retirement, wellness, voluntary and attraction and retention. Join the discussion on LinkedIn, Facebook and Twitter, using the hashtag #2015outlook.
As health care reform continues to unfold, employers are re-examining the role of their benefit programs in their overall human capital strategy and coming around to the idea that attracting, retaining and engaging workers hinges on the total employee experience, not health care benefits alone.
Traditionally employers spent a lot of time managing their medical benefit. But what were seeing over time is a lot of [benefit] strategies are converging, says Mike Thompson, principal with consulting firm PricewaterhouseCoopers LLP and head of the firms NY-metro health care practice. Previously, wellness was kind of the tail related to the medical benefit and costs but, going forward, well-being is the dog. The focus is going to be more on how to support the well-being of employees, including their health. [Medical] benefits are part of that, but less of a driver for that well-being strategy.
Doug Fisher, a senior vice-president with Fidelity Investments, agrees that employers are looking at all their benefit programs, including 401(k) plans, more holistically. Heading in to 2015, they will look at retirement from the lens of whether their retirement plans align with many of their other workforce strategies, he says.
And with the ACAs excise tax looming, benefits have taken on a new level of importance among the C-suite. We now have the CFO or CEO at the table with almost every renewal discussion, says Keri Lopez, chief operating officer, western region benefits, with Ascension Benefits & Insurance Solutions. And the discussion is focused much more on strategy than it is around the tactical side, trying to figure out what theyre going to do over the next three years, not just this current plan year.
Also see: HSA growth linked to excise tax concerns
Against this backdrop of benefits convergence, EBN presents a 2015 benefits outlook, shedding light on whats in store for the year ahead.
While 2014 could be considered the year of the employer mandate, 2015 is poised to become the year of the Cadillac tax as employers look to further rein in their health care spending before the tax goes into effect in 2018.
A combination of strategies can help employers delay the 40% tax that will be imposed on the value of health insurance benefits exceeding a certain threshold $10,200 for individual coverage and $27,500 for family coverage. Roughly half of large U.S. employers will begin to hit the excise tax thresholds in 2018 and the percentage is expected to rise significantly in subsequent years, according to an analysis of large employer health care programs conducted by consulting firm Towers Watson.
Steve Wojcik, vice president of public policy with the National Business Group on Health, anticipates employers will focus on six strategic areas in 2015 and beyond to mitigate the effects of the tax by keeping the value of their health insurance benefits below the thresholds:
1. Wellness. Employers will boost investments in wellness programs to help employees adopt healthier lifestyles.
2. CDHPs. There will be a continued movement toward consumer-directed health plans and health care consumerism in general.
3. Health care cost transparency. Employers will increase their offerings of health care cost transparency tools and other ways of helping employees navigate the health care system.
4. Direct contracting. Some employers will take a closer look at contracting directly with providers, accountable care organizations, medical homes and provider networks where health care practitioners are accountable for employee health outcomes.
Also see: ACOs make inroads with employers
5. Spousal surcharges. Employers will increase cost-sharing by way of lowered subsidies for spousal health coverage, or through
the introduction of spousal surcharges.
Also see: Dumping your spouse
6. Private exchanges. There will be increased scrutiny of private exchanges. Every employer is monitoring early adopters of private exchanges, says Thompson. The success, or lack thereof, of private exchanges, will be a key factor in helping employers move some of those costs, he says.
Another trend to watch: Benefits outsourcing. Larger employers are looking for help in this area, particularly as they track employees with variable hours for ACA reporting purposes. They are looking to partner with a vendor who will actually do the tracking and IRS reporting for them, says Lopez. Some very large employers are adding staff on their HR teams to do the administration. Smaller employers are looking to their payroll vendors.