Private Exchanges Remain on Top
Organizations large and small continue to see the value of offering employees healthcare coverage.Earlier this year, the Congressional Budget Office (COB) significantly reduced its estimate of how many people in the U. S. would get health insurance in 2016 through the public exchanges from 21 million to 13 million. This was important news, but it didn’t get a lot of attention amidst the more sensational noise of the White House race. Yet, as the New York Times pointed out, the lower estimate was at least partly because employers are not dropping health insurance plans at the rate that CBO analysts initially expected.
Indeed, government projections for employer coverage were based on the assumption that employers would find it less expensive than continuing their own plans in the wake of the Affordable Care Act’s requirements. Employers who no longer offer health coverage would pay a $2,000 per employee penalty and would likely need to boost employees’ salaries to help offset premiums employees would pay for coverage in exchanges. But that $2,000 penalty is not tax deductible and the gross increase in pay also has tax implications for employees. In some scenarios, the employer pays more or runs the risk of employee backlash.
Through its annual Survey of Employer-Sponsored Health Plans, Mercer has been tracking employers’ intentions about terminating plans since 2008. The research showed that very few large employers seriously contemplated dropping their plans.However, small employers are less likely to offer coverage to begin with, and in the early years of healthcare reform, about 20 percent of health plan sponsors with between 50 and 499 employees said they were likely or very likely to drop coverage within five years. That number began to fall in 2014, when the public exchanges became operational, and fell even further in 2015, to just 7 percent. This is close to the percentage of large employers that say they are likely to drop coverage (5 percent in 2015) .
Why are small employers changing their minds about dropping coverage? Probably for many of the same reasons that large employers didn’t see it as a good option from the beginning, even though smaller employers offer less generous coverage, have lower average costs, and realize higher annual increases than larger employers. While it can be tough to keep health benefit costs within their financial comfort zone, smaller organizations have been able to manage it, so far.
More to the point, perhaps, Mercer’s recent Inside Employees’ Minds survey of employee attitudes found that 89 percent of US employees say getting health benefits through work is just as important to them as getting a salary. This proves that employees consider benefits a huge part of the overall value proposition, and employers need to keep this in mind as they seek to attract and retain top talent.
Fortunately, both large and small employers have greater options and better tools, now that the ACA era of healthcare reform is upon them. For example, rather than drop healthcare coverage and push employees to the public exchanges, increasing numbers of employers are taking advantage of the availability of private healthcare exchanges. These thirdparty marketplaces not only relieve employers of the burden of benefits administration, they also provide employees with a seamless online platform for healthcare enrollment—often with a wider range of plan choices, as well as access to voluntary benefits and other options.
Organizations can also take advantage of the rise of online calculation and comparison tools that help employees make better choices for themselves and their families. It’s one thing for employers to encourage their workforce to be better and wiser consumers of healthcare—and the mainstreaming of wellness programs, onsite clinics, and mail-order pharmaceuticals certainly helps—but it’s another thing to become a well-informed consumer of healthcare, given the complicated array of deductibles and co-pay options. Online access to clear, reliable, easy-to-use estimating tools goes a long way toward molding smart consumers.
These tools also go hand-in-hand with employee education about healthcare and insurance needs. But at a time when there are more options to consider, from basic healthcare to critical disease coverage, employers should expect and demand well-designed and well-delivered information – across platforms, including tablets and mobile devices – from their providers.
The simple fact that employers are not dropping health insurance plans at the CBO’s expected rate affirms the traditional value of such benefits to organizations and their workers. The challenge for employers is to keep up with the pace of change, ensuring a sustainable workforce for the future and playing a positive role in the health, wealth, and career of today’s—and tomorrow’s—employees.
Michael DiSimone is Mercer Services’ global health delivery leader.