By Carol E. Potaczek, J.D.
Despite already modifying their benefit plans last year, employers expect their healthcare costs to rise again in 2016, which will require additional changes, according to the Employee Benefits Trend Study released today by Wells Fargo Insurance, part of Wells Fargo & Company. Fifty-eight percent of employers surveyed expect their medical plan costs to exceed the thresholds for the excise or “Cadillac” tax under Sec. 9001 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). The tax was originally to take effect in 2018, but it has been delayed until 2020. Additionally, 70 percent of employers expect their budgets for benefit plans to increase, as human capital and health and productivity remain key issues for businesses to manage.
The Employee Benefits Trend Study surveyed C-Suite executives, and human resource and employee benefits managers at more than 650 middle-market companies and large corporations to better understand how organizations are responding to health care reform requirements, while also developing a competitive benefits strategy.
Different goals. Both long-term and short-term goals were different for C-suite executives and human resource (HR) and employee benefits (EB) managers. For example, for both the long- and short-term, C-suite executives were reported to have shifted their priorities toward expanding the offering of voluntary benefits. HR/EB managers, however, responded that their top long- and short-term goal was to manage the overall costs of health care benefits. Expanding voluntary benefits was ranked seventh out of eight top goals for HR/EB managers.
“As they balance business goals with controlling cost, employers are also exploring additional changes to their plans to avoid the Cadillac Tax,” said Dan Gowen, national practice leader with Wells Fargo Insurance’s Employee Benefits National Practice. “The rapidly changing market and delay in the tax implementation provides another opportunity for employers to be creative as they continue to refine their benefit plans.”
Half of the employers in the study said they will continue to make changes to their plans either this year or in 2017 by adding a high deductible plan option (52 percent), increasing the employee contribution percentage (56 percent), or increasing co-insurance features (55 percent).
Employers are also making strategic changes to plans that address not only the physical well-being of their employees, but also chronic condition management and mental, financial, and social well-being. The survey found that as an employee engagement strategy, employers are taking a multi-pronged approach by adding incentives or penalties and increasing health and wellness offerings:
- Voluntary benefit solutions - As more employers offer high deductible health plans, the C-suite is also aware of the financial exposure that employees face with these types of plans. As a result, they are looking to mitigate those costs by offering voluntary benefits solutions (e.g. critical illness and accident insurance).
- Wellness offerings - Employers of all sizes are seeking ways to encourage a healthier and more productive workforce. Fifty one percent of companies expect to increase wellness offerings, and 37 percent will add wellness incentives or penalties to their programs in 2016.
- Focused on return on investment (ROI) - 91 percent of C-suite respondents said improving the health of employees is important as it correlates with lower medical costs, reduced absenteeism, and increased productivity.
Aside from becoming compliant with the ACA and lowering costs, the study also found that C-suite executives are making changes to their plans because of an increased focused on attracting and retaining talent, with 62 percent saying it is a top concern, up from 45 percent last year.
“If the economy continues to improve, the demand for talent will grow, and having a benefits program that fits the company’s culture is crucial to securing key talent,” said Gowen. “As employers focus on attracting and retaining talent, they can partner with their insurance broker and employee benefits advisor to explore making changes that best support their business goals and strategies.”
As a consequence, Wells Fargo advises employers to ask themselves if their benefits package is appropriate for the majority of their existing workforce as well as for prospective employees and if they consider the ages and salaries of their entire workforce when developing their benefits design. Wells Fargo also advised that employers consider whether or not their employees have asked for enhancements that they have not been able to provide, and if there are gaps that leave some or all employees exposed.
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