Maintaining a sustainable benefit philosophy under the ACA (Affordable Care Act) may require a new approach. Besides the challenges of this complex law, we are seeing for the first time in history, a changing workforce demographic where employees come from three or four generations, all having different needs. Is it time for a paradigm shift?
Employee Benefits will remain a key differentiator for attracting and retaining talented employees. Benefit costs and value will become far more transparent than ever before. This moment in time presents employers with an opportunity to provide a greater sense of value to employees and their qualified dependents in the form of personal choice, affordability, convenience and tax efficiency.
The days of a “one plan fits all” meeting everyone’s needs based on how much an employer can afford or bargains for, will be virtually gone. Employers are rethinking their benefit philosophy to offer a safety net approach to a multi-generational, multi-cultural work force covering a broad scope of economic classes that prefer programs with options to best match their personal needs. Moving away from a shared premium model, employers will provide a “defined contribution” and employees will choose from a grouping of plans. Innovation will drive the market in the form of private and custom insurance exchanges to facilitate education and enrollment in the offerings.
Recent trends combined with years of market studies show the following five key elements emerging in practice to develop a successful post ACA benefit philosophy.
Five Key Elements to Include in your Benefit Philosophy
- Defined Contribution Model - targeted contribution funding allowing employees to choose a plan, risk, and cost, subsidized by the employer allowance. Employees pay the difference (premium – allowance). Early adopters have shown that when employees take ownership of the process and the allowance is now envisioned as their money, they purchase differently and many buy down (lower cost – higher deductible plans). To compliment the core choices, employers offer additional elections such as Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs) and supplemental benefit purchases.
- Consumer Engaged Plans - offering multiple choice including account-based High Deductible Health Plans (HDHP) paired with Health Saving Accounts (HSAs) or Health Reimbursement Arrangements (HRAs). Of the two models, HSAs have shown greater cost control through behavior change.
- Worksite Health Improvement – targeting 90%+ participation of employees and spouses. Recent EEOC guidelines and ACA provisions allow incentives or penalties (which drives participation) up to 30% of the single premium to engage employees and their dependents to participate in screenings and health-contingent wellness programs. If you add smoking cessation, the incentive or penalty can be as high as 50% (depending on if you require testing or not).
- Health Literacy and Transparency - proper plan use and provider selection based on performance and cost. Prices vary greatly for diagnostic and testing procedures, even within the same network. Transparency tools showing price and quality of a provider are now available. New provider delivery models are emerging, introducing a pay for performance model for providers through Accountable Care Organizations, (ACOs) and Patient Centered Medical Homes (PCMHs). Training and Engagement will benefit both the individual and the plan in controlling costs with better outcomes.
- Eligibility Management - defining full time eligible status to meet ACA requirements, dependent eligibility audits and adoption of spousal waiver provisions will all play a larger role in defining programs. Employers will support benefits for their employees and legal dependents. They will not be so quick to cover another employers’ responsibility. Even Retiree programs are coming under greater scrutiny due to the implicit added cost to the overall group. This can ultimately impact the plan’s Cadillac Excise Tax liability and if in the public sector, GASB liability as well..
These five key elements have proven successful in mitigating health trend increases, meeting diverse needs of employees and complying with the ACA law. Sustainability will ultimately be a driving factor in what benefit options an employer will offer their employees. The days of controlling cost by simply changing a plan design or raising a deductible are gone! The basics of insurance still apply: premiums are weighted heavily based on plan performance and the cost of risk or claims versus premium. In the end, it is the engaged culture an employer develops that will determine the outcome of your post ACA benefit philosophy.
About the Author
Michael E. Wojcik, is Senior Vice President of The Horton Group, one of the regions largest privately-held insurance agencies specializing in Insurance, Risk Advisory and Employee Benefits. Through his engagement in many facets of Health Care and innovative drive, he has been recognized as a thought leader in the industry.