Employers value cost containment

September 1, 2010

U.S. employers don't expect health reform to advance their goals. That's according to a recent survey conducted by Towers Watson. The survey found a major disconnect between employer priorities and the impact they anticipate the PPACA will have.

U.S. EMPLOYERS don't expect health reform to advance their goals. That's the sentiment expressed by 661 respondents in a recent survey conducted by Towers Watson, a global professional services company.

"Right now from an employer perspective, there's more of a focus on the burden of implementation," says Julie Stone, a senior consultant with Towers Watson. "Once they get past figuring out what they have to do for January 1, 2011, they need to figure out how to embrace the law and make it part of their strategy."

The survey found a major disconnect between employer priorities and the impact they anticipate the Patient Protection and Affordable Care Act (PPACA) will have.

Unfortunately, few expect reform legislation to advance those goals. In fact, 94% of respondents said they expect healthcare reform to increase their organization's healthcare costs. Respondents expect an excise tax on rich benefit plans-43% expect they will be subject to the tax-and the mandate to cover dependents up to age 26 to be primary cost drivers.

LESS PRESSING ISSUES

But cost isn't the only employer priority the legislation fails to address, they say. Most (61%) believe the law won't do anything to encourage healthier lifestyles, improve quality of care (46%) or reward providers for healthy outcomes (48%). The areas where major employers expect the legislation to have the greatest impact-reducing the number of uninsured and improving access to care-are issues that are less pressing to companies.

If the legislation increases their healthcare costs as anticipated, most employers (88%) say they'll pass any cost increases on to employees and reduce their health benefits and programs (74%). For the moment, however, most companies are focused on educating senior executives about the impact of reform and modeling its anticipated impact on their organizations.

Stone says employers have to start crunching numbers to include the value of healthcare benefits on their W2s.

She also expects several trends to accelerate. Employers will move toward low cost plans, measuring return on investment, and plans that emphasize consumer behavior. There will be a further reduction in the number of employers offering retiree coverage.

Respondents anticipate the same: more than half expect the number of large employers adopting total replacement consumer-directed health plans-such as health savings accounts (HSA) or health reimbursement arrangements (HRA)-to increase, while more than three-quarters say more employers will drop retiree coverage.

As these trends solidify, Stone says employers will need to take a more holistic look at their total benefit packages. While they may whittle away at health benefits to avoid incurring taxes, they're likely to place greater emphasis on other forms of compensation, such as 401(k) contributions and training and development.

"They need to look at what differentiates them and contributes to employee engagement," she says. "Employers who use this as an opportunity to see how healthcare sits in their total rewards package will be in the best position."

-Shelly Reese

Commentary is independent of source data.