In 2008, while Congress was hammering out healthcare reform, automotive supplier BorgWarner was doing some deep thinking about its own healthcare strategy. Somehow the company had to slow down healthcare costs, which were rising more than the rate of inflation. Introducing more cost-sharing and giving employees better healthcare decision-making tools seemed to be the answer. But how? BorgWarner employees historically had not paid a share of premiums—the company covered 100%--so any change would be a milestone of sorts.
After much collaboration with its main healthcare supplier, Cigna, BorgWarner rolled out what ended up being one of the earlier models for consumer-driven health plans. It bumped up employees’ share of premiums from 0 to 20%, but cushioned the blow by stipulating that workers who completed a health assessment and were tobacco-free could cut their share to almost nothing. It introduced on-site clinics, wellness programs and personal health coaches, and winnowed multiple vendors down to one, Cigna.
The program saved BorgWarner almost $6 million a year. The company now spends on average $9,800 annually on healthcare per employees—14% less than the $11,500 average for large manufacturers, according to human resource consulting firm Towers Watson. Costs are rising at 4.4% per year, less than the 5% industry average.
The healthcare plan is in good enough shape that Michelle DuFour, senior manager for global benefits at BorgWarner, doesn’t anticipate any changes when the Cadillac tax goes into effect in 2018. The Cadillac tax is a 40% tax levied on employers who pay more than $10,200 in healthcare costs per employee and $27,500 per family.
BorgWarner is something of an anomaly for companies of its size. Nearly half of large employers (48%) will qualify for the Cadillac tax in 2018, according to an August 2015 survey of 140 such companies by the non-profit National Business Group on Health. That rises to 72% in 2020, if things stay as they are.
“We thought we would see greater movement toward consumer-directed health plans this year,” but that didn’t happen, said Karen Marlo, NBGH’s vice president.