Employers are taking matters into their own hands as they get ready for the 2011 benefit plan year. There’s a growing recognition that the health care bill passed by Congress on March 21 won’t help lower costs, forcing firms to act on their own if they want to survive. In fact, many employers believe the pending health bill will only add to their problems. “Health reform will result in not only increased costs for employers, but less generous benefits for employees,” says Helen Darling, president of the National Business Group on Health.
Most companies will make workers pay a bigger share by raising premiums, deductibles and copayments. These increases will affect both the medical and pharmacy plans. Surcharges for providing health care coverage to working spouses will also increase, to encourage those spouses to use their own employer’s health plan.
But the real emphasis will be on behavior, with businesses using more sticks and fewer carrots to pressure employees to adopt healthier lifestyles and participate in programs to manage their chronic illnesses. In a recent survey by Hewitt Associates, nearly half of employers say they plan to use financial penalties for workers who don’t participate in certain health improvement programs. “Employers have come to realize that they have to manage their risks, not just costs,” says Rick McGill of Hewitt, a benefits consulting firm.
Big bucks are at stake. About 70% of health care costs are driven by behaviors. The difference in cost between a diabetic who manages his or her disease compared with one who doesn’t can be 10 times higher, says McGill.
Workers who don’t play ball will pay more. Employers are realizing that penalties work better than rewards and are planning to ramp them up. To avoid running afoul of federal antidiscrimination laws, businesses can’t base penalties or rewards on results, but they can discount rates for participation. For example, employers will impose higher premiums for smokers who refuse to participate in a smoking cessation class, or will relegate wage earners who refuse to participate in wellness activities to a health plan with leaner benefits.
More firms are also using their own clinics to cut costs, on-site if the company is big or nearby when smaller businesses work together. Clinics offer low prices, convenience and noteworthy success rates.