Health News

Employers Taking Bold Action to Manage Health Costs and Offer Affordable Care, Towers Watson/National Business Group on Health Survey Finds

Apr 25, 2011

Health care costs expected to increase by 7% in 2011; adoption of account-based health plans projected to jump

Over the past year, employers have focused their efforts on immediate compliance with health reform, but looking ahead to 2012 and beyond, many employers are pursuing bolder actions and implementing health program changes to hold employees and providers more accountable in the struggle to manage costs and improve worker health, according to findings from the 16th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care.

The shift toward bolder health care benefit design decisions is being driven by continuing cost challenges and the anticipated effects of health care reform. Employers expect average costs for active health care benefits to increase by 7% in 2011, up from a 6% increase in 2010. While increases have stabilized over the past few years, they considerably outpace wage increases year over year, continuing to place significant financial pressure on employees and their families. According to the research report, the total anticipated annual costs per active employee are expected to reach $11,176 (up 7.6% from $10,387 in 2010), and the average employee’s share of costs in 2011 is expected to rise 11.8%, to $2,660.

“We cannot continue to think that the rise in health care costs is sustainable. Health care costs have experienced dramatic cost inflation over the past two decades, and employers continue to subsidize the majority of plan costs,” said Helen Darling, president of the National Business Group on Health. “But these costs are cutting in,nto employers’ profitability and the total rewards they are able to offer employees, plus concerns about the future Cadillac tax add a new level of urgency to their challenges. Employers that are best able to minimize this cost burden will be those that are able to provide the most competitive benefits package and attract the most talented employees.”

The report also revealed cost variations in the different plan types. Account-based health plans (ABHPs)* are the most affordable plan type, costing $730 less than HMOs for employee-only coverage and $2,118 less for family coverage. Preferred provider organization (PPO) and point of service (POS) are the most expensive plan types, costing an average employee about $200 more than a typical health maintenance organization (HMO) plan for single-only coverage and more than $750 more for family coverage.

Sweeping Design Changes on the Way

To control the impact of these rising costs on employers’ total rewards offerings and preemptively guard against reform penalties, employers are planning to move beyond minor adjustments and make the most systemic changes in decades.

“Health care benefit managers have historically been focused on making incremental plan design changes,” said Randall Abbott, a senior health care consultant with Towers Watson. “When confronted with the post-reform health care landscape, employers are now considering sweeping changes to their health benefit and workforce health improvement strategies. Increasingly, this is a focus of the executive suite, which is accelerating the discussion.”

To mitigate costs and minimize the longer-term impact of reform, employers are redesigning health benefit programs to incorporate enhanced point-of-care consumerism, repositioning incentives to improve employee engagement, redefining their financial commitment to dependent and retiree coverage, and emphasizing use of high-value providers. Among the notable planned benefit design changes are:

  • Dependent coverage subsidies: 68% are moving to increase contributions for dependents, with 19% targeting per-dependent contributions, and 35% using or planning to implement spousal waivers or surcharges.
  • Retiree medical coverage: 26% of employers plan to cease employer sponsorship; 25% plan to convert a current subsidy to a retiree health account, and 23% plan to eliminate employer-managed drug coverage for post-65 retirees and rely on Medicare Part D plans.
  • Incentives for high-value providers: 28% of employers plan to differentiate cost sharing for high-performance networks or centers of excellence in 2012, and 21% plan to adopt value-based designs over the next year. In addition, 18% plan to offer incentives or penalties to providers for coordination of care, use of emerging technologies or use of evidence-based treatments.
  • Accountability for engagement: A third of employers plan to reward or penalize their employees based on biometric outcomes (for weight and cholesterol), compared with just 7% in 2011 and 6% in 2010. Social media is one of the emerging creative strategies employers (9%) are using to improve employee health and well-being.

ABHP Adoption Increases, Driven by Proof of Plan Efficacy

Recognizing the financial benefits for the business and their employees, employers are continuing the shift toward ABHPs. In 2002, just 2% of all employers offered ABHPs, but by 2011, that number has exploded to 53%. By 2012, another 13% of all respondents plan to add an ABHP. In addition to effectively lowering employer health care cost trends and helping employers delay costs related to the implementation of the 2018 excise tax, these plans can offer employees the ability pay for current costs while giving them a wealth-accumulation vehicle for retirement.

Employers are trying to encourage ABHP adoption by offering employees significant reductions in premium contributions. For example, 56% of employers set their employees’ ABHP premium contributions at least 20% lower than contributions for their traditional plan, and more than one in four employers (26%) cut employee premium contributions by more than half when compared with other plan types. On the employer side, companies that added 10% or more employees to their ABHP between 2009 and 2010 held their health care costs nearly flat, and the companies that were most successful at driving ABHP adoption reduced their costs by nearly $1,000 per employee.

Long-Term Effects of Reform Driving Strategic Decisions Today

The Towers Watson/NBGH survey revealed that employers believe the opening of insurance exchanges in 2014 will have some impact on their active (70%) and retiree (78%) medical programs. In addition, more than a quarter of employers (27%) believe the opening of the exchanges will have an extensive impact on their retiree plans. The implementation of the excise tax is expected to have an impact on both active (81%) and retiree (66%) medical programs as well, with 24% and 20% of employers anticipating an extensive impact on their active and retiree programs, respectively.

While the excise tax will not take effect until 2018, Towers Watson research has shown that, if current average annual cost increases continue, 60% of companies will reach the taxable level by 2018, and companies that take strategic actions now will have a distinct competitive advantage.

*The Towers Watson/National Business Group on Health Employer Survey defines an account-based health plan as a plan with a deductible offered together with a personal account (i.e., health savings account or health reimbursement arrangement) that can be used to pay a portion of the medical expense not paid by the plan.

Southeastern States Mired in the 'Diabetes Belt': CDC Report

Apr 25, 2011

HealthDay
Serena Gordon
March 09, 2011

Wide swath cutting across U.S. needs better prevention and treatment efforts, study suggests

People living in certain areas of the United States are more likely to develop diabetes, according to a new government analysis.

Researchers from the U.S. Centers for Disease Control and Prevention have discovered that a wide swath across mostly southern U.S. states has diabetes rates above 11 percent, compared to 8.5 percent for the rest of the country.

"There's a region of the U.S. that we identified as the 'diabetes belt,'" said study author Lawrence Barker, associate director for science in the division of diabetes translation at the CDC in Atlanta. "People living inside the belt are more likely to have diabetes than those who live outside the belt," he explained.

The CDC currently estimates that diabetes affects almost 26 million American adults, or just over 8 percent. There are two types of diabetes: type 1, which used to be known as juvenile diabetes; and type 2, formerly known as adult-onset diabetes.

Type 2 accounts for the majority of diabetes -- possibly as much as 95 percent of all cases, according to Barker -- and the risk of developing type 2 diabetes is influenced by genetics, weight and physical activity. Type 1 is believed to be an autoimmune disease. Weight and physical activity levels don't contribute to the development of type 1 diabetes, he noted.

Barker and his colleagues reviewed data from the U.S. Behavioral Risk Factor Surveillance System, and compared the data to county-level estimates of diabetes prevalence. These data sources didn't allow the researchers to break down the estimates by diabetes type, Barker pointed out.

Like the U.S. "stroke belt," discovered in the mid-1960s, the "diabetes belt" is located primarily in the southeastern states.

The diabetes belt consists of 644 counties in 15 states, including: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and West Virginia, according to the study. The entire state of Mississippi made the cut.

People living in the diabetes belt counties were more likely to be black (23.8 percent in diabetes belt counties versus 8.6 percent in the rest of the country), and were more likely to be obese (32.9 percent in the diabetes belt compared to 26.1 percent in the rest of the country). And, a sedentary lifestyle was more common in the diabetes belt areas than nationally (30.6 percent versus 24.8 percent, respectively).

The study also found that the number of people with a college degree was lower in the diabetes belt counties than in the rest of the country: 24.1 percent versus 34.3 percent.

"We've identified a part of the country where people are at a greater risk of developing diabetes. We can use this information to identify regions where the need for prevention is greatest," said Barker.

"This study identifies an area where people are at very high risk of diabetes, but there are other hotspots in the country, such as certain areas in Detroit or New York City," said Dr. Joel Zonszein, director of the Clinical Diabetes Center at the Montefiore Medical Center in New York City.

"The study also says that about 30 percent of the risk of type 2 diabetes is probably modifiable with a better diet and more physical activity," noted Zonszein. It's also very important to diagnose the disease early and start treatment as soon as possible to help avoid complications, he added.

"Early diagnosis leads to better outcomes," Zonszein said.

"For people who don't yet have type 2 diabetes, physical activity and losing weight can help reduce the risk of developing the disease, and people in the diabetes belt are even more at risk," Barker advised.

IRS Announcement Adds Breast Pumps and Lactation Aids to the Medical Account Eligible List

Feb 14, 2011

Just released guidance from the IRS provides new and expectant mothers with some welcome financial relief. The guidance (IRS Announcement 2011-14), which was released February 10, 2011, adds breast pumps and supplies and lactation aids to the list of items eligible for reimbursement from a medical account (such as a Flexible Spending Account (FSA), Health Reimbursement Arrangement (HRA) or Health Savings Account (HSA)). With the ruling, which takes effect immediately, breastfeeding mothers can use their medical accounts to purchase or be reimbursed for eligible lactation-related expenses. This follows on the heel of the Affordable Care Act's requirement to provide both lactation breaks and facilities.