Majority of Large Employers Revising Health Benefit Programs for 2011

Employers projecting costs to increase 8.9% next year

A majority of large U.S. employers are moving forward with plans to make changes to their 2011 health care benefit programs in the wake of both health reform and expected large health benefit cost increases next year, according to a new survey by the National Business Group on Health, a non-profit association of large employers.

The survey found that more than half (53%) of respondents are still planning to make changes to their benefit plans despite the uncertainty that exists around complying with the Patient Protection and Affordable Care Act. Another two of ten employers (19%) are scaling back changes they planned to make while an equal number are making no changes. The remaining respondents were still undecided pending further review of the final regulations.

Among the employers who will be making specific changes to their health benefit plans to comply with the new law, 70% said they will remove lifetime dollar limits on overall benefits while 37% reported they will make changes to annual or lifetime limits on specific benefits. About one in four (26%) will remove annual dollar limits on overall benefits while 13% will remove pre-existing condition exclusions for children. The survey, based on responses from 72 of the nation's largest corporations representing more than 3.7 million employees, was conducted in May and June, 2010.

"While the health reform law has forced employers to evaluate their health care benefit strategies and decide whether to comply with the law or lose grandfathered status, they haven't lost sight of the fact that controlling rising costs remains one of, if not, their highest priority. They have to foot the bill, not the government," said Helen Darling, president of the National Business Group on Health. "In fact, with cost increases expected to accelerate next year, many of the plan design changes employers are making are being done to help curb those increases, as they have to do every year."

According to the survey, employers estimate their health care benefit costs will increase an average of 8.9% next year, compared with an average increase of 7% this year. To help control those increases, employers are planning to use a wider variety of cost-sharing strategies. The survey found 63% plan to increase the percentage employees contribute to the premium, up from 57% who did so this year, while 46% plan to raise out-of-pocket maximums next year compared with 36% this year.

More Employers Shifting to Full-Replacement Consumer-Directed Health Plans

More than six in ten (61%) employers will offer a consumer-directed health plan (CDHP) in 2011. While the most common type of plan employers will offer is a high-deductible plan combined with a health savings account (64%), the survey found a big spike in employers moving to a full replacement plan. Among employers offering a CDHP, the number moving to a full replacement plan doubled from 10% this year to 20% in 2011.

Other survey findings include:

  • With the health reform law making Medicare Part D benefits richer as the "doughnut hole" closes between now and 2020, 5% plan to drop retiree health coverage in 2011 while 60% are considering doing so.
  • Four in ten (41%) employers offered premium discounts for completing health assessments while 22% offered premium discounts for participating in tobacco cessation programs.
  • One in four (25%) employers plans to raise the co-pay or co-insurance for retail pharmacy prescription drug benefits while 21% plan to do the same for mail-order pharmacy benefits.
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