A multitude of studies continue to measure and monitor employer reactions to health reform. The big question typically included in surveys has to do with the employers likelihood of continuing to provide group health coverage. Findings have not been altogether consistent, some studies like McKinsey’s estimate earlier estimated 30% of employers would drop coverage once Health Insurance Exchanges became available, while others estimate a far lower number.
Gfk Custom Research North America this week released findings from such a study (surveying 502 private sector companies) that seems to land in the middle ground, and thus might be a reasonable assessment of employer’s current state of mind. Here’s what Gfk found overall:
56% of employers surveyed are likely to continue to offer employer-sponsored health insurance after health care reform is fully enacted
12% of benefits decision-makers say they would be very or somewhat likely to drop coverage
32% are unsure what they will do
But the important thing to emphasize when bandying about such numbers is the size of the employers surveyed. Gfk notes that “only four percent of decision-makers surveyed from those companies with 500 or more employees considering terminating coverage completely. In addition, decision-makers who say they are familiar with health care reform are less likely to foresee their dropping coverage (7 percent, versus 15 percent among those not familiar).”
In fact, given that HIXs (Health Insurance Exchanges) are being designed to target small businesses in addition to individuals, it is not a bad thing – and one should expect – that employers in that sector would be considering dropping their own group coverage in favor of the exchanges.
The survey also found that employers don’t believe reform will save anyone money:
11% believe costs of health benefits will increase more slowly than if no reform had passed
51% think costs will increase more rapidly because of reform.
38% are not sure about the effect of health reform on future costs.
It's one thing for a multi-state employer to weave their health care strategies through the maze of varying state regulations, delivery systems, demographics, patterns of care and consumer behavior. Consider the daunting task of attempting to synthesize a strategy that reaches across nations and continents.
TowersWatson tackles the subject, this week releasing results from their multinational employer health care survey: Workforce Health Strategies: A Multinational Perspective. The survey “includes responses from 106 organizations that have at least 500 employees and significant business operations in more than one country. Ninety-three percent of the participating companies are based in North America and manage, on average, 25 health programs and operate in 20 countries around the world.”
Francis Coleman, senior international consultant with Towers Watson tells us “to mitigate growing health care risks and associated costs as well as boost worker productivity, multinationals can increase their use of health strategies that are truly global. In particular, forward-looking multinationals are using leading indicators of health and well-being to proactively and effectively focus their resources rather than react to the rising costs caused by lifestyle diseases and increased adoption of advanced medical technologies.”
But in considering the topic that TowersWatson raises, the question rattles around in the back of my mind ‘How big of a deal is this? After all, can the scope of the multinational work force really be that large?’ So a little background research was in order. First stop, the U.S. Census Bureau, Table 772. United States Multinational Companies--Selected Characteristics which indicates that in 2006 their scope incorporated:
Total assets $18.5 trillion
U.S. Parents
Capital expenditures $442 billion
Value added: $2.5 trillion
Employment : 21.7 million
Majority-owned foreign affiliates:
Capital expenditures $153 billion
Value added: $996 billion
Employment 9.6 million
So the answer is, yes, the scope is big, and is largely U.S. centric. The National Foreign Trade Council in a press release last year entitled U.S. Multinational Companies Strengthen the Domestic Economy informed us that “The worldwide operations of U.S. multinational companies are highly concentrated in America, not abroad in their foreign affiliates. Domestic parent companies accounted for nearly 70 percent of worldwide employment of U.S multinationals….and represents about 19 percent of total private-sector payroll employment….Foreign affiliates are located primarily in high-income countries that in many ways have economic structures similar to the U.S., not in low-income countries. Affiliates in high-income countries accounted for 79 percent of total affiliate output. …U.S. parent companies account for nearly 25 percent of all private-sector output (measured in terms of GDP), or more than $2.5 trillion.”
Getting back to the matter at hand, here are some key results from the Towers Watson Multinational Survey:
26% have a global health strategy in place today, and an equal number plan to implement a global health strategy by 2012
77% offer employee health programs in lieu of, or in addition to, publicly provided programs in all or most of the countries in which they operate.
83% of respondents said that stress have a high or moderate impact on their health care costs and workforce productivity, while 77% said chronic conditions and 63% said obesity (63%) had this impact.
40% of respondents provide case management programs in most or all countries, while 25% provide disease management, 30% offer health promotion, health screenings and behavioral health programs and 25% provide health risk assessments in most or all countries.
51% indicate that non-U.S. markets lack available or reliable health care cost data 44% said these markets lack available or reliable health care products and services and 30% said they lack desired health care vendors
<!--[if !supportLists]-->·<!--[endif]-->26% have a global health strategy in place today, andan equal number plan to implement a global health strategy by 2012
<!--[if !supportLists]-->·<!--[endif]-->77% offer employee health programs in lieu of, or in addition to, publicly provided programs in all or most of the countries in which they operate.
<!--[if !supportLists]-->·<!--[endif]-->83% of respondents said that stress have a high or moderate impact on their health care costs and workforce productivity, while 77% said chronic conditions and 63% said obesity (63%) had this impact.
<!--[if !supportLists]-->·<!--[endif]-->40% of respondents provide case management programs in most or all countries, while 25% provide disease management, 30% offer health promotion, health screenings and behavioral health programs and 25% provide health risk assessments in most or all countries.
51% indicate that non-U.S. markets lack available or reliable health care cost data 44% said these markets lack available or reliable health care products and services and 30% said they lack desired health care vendors
Carrots and Sticks. Will employee health behaviors they fix? Or are they just a fad, pulled from employers’ big bag of tricks? Should incentives or penalties be preferred, oh what’s the right mix? Surveys may tell us the answer, about Carrots and Sticks.
Hewitt’s Cathy Tripp tells us "the economy and continued escalation of health care costs have driven many employers to be a little more bold and demanding of their employees, making disincentives an increasingly attractive option. As companies learn more about their workforce, they're realizing that some people may be more motivated to take action if they risk losing $100 versus gaining $100. The key for each employer is to find the right mix of strategies and plan designs that will motivate employees to be healthier, but not go so far as to drive the wrong behaviors."
The Hewitt survey tapped 600 large employers representing 10 million+ employees. Here’s what they found:
Penalties for non participation in health improvement programs
47% either already use or plan to use financial penalties over the next three to five years
81% of those using/planning penalties will impose higher premium contributions; 17% will apply increased deductibles; and 17% will design higher other out-of-pocket cost sharing
Of those using/planning penalties, the behaviors that will trigger penalties were: smoking (64%); non-participation in disease management/lifestyle behavior programs (50%); non-participation in biometric screenings (45%); non- participation with a health coach (25%); failure to achieve applicable biometric improvements (17%)
Incentives for participation in health improvement programs
58% offer incentives, with 24% of them extending incentives to spouses and/or family members
63% of those offering incentives provide cash for completing a health risk questionnaire (35% in 2009)
37% of those offering incentives cash incentives for participating in health improvement and wellness programs (29% in 2009)
14% of those offering incentives cash incentives for participating in condition management programs (17% in 2009)
Towers Watson Findings
Hewitt isn’t alone in seeing a trend is in the works. Towers Watson last week released additional findingsfrom their 15th Annual NBGH/Towers Watson Employer Survey on Purchasing Value in Health Care which covered 507 employers of 1,000 or more employees, representing 11.5 million employees, also concluding that employers are going to be putting much greater emphasis on incentives and consumerism.
Ted Nussbaum, senior consultant with Towers Watson tells us "employers are frustrated by their employees’ low use of expensive health improvement programs. As employers continue to empower workers to be more health focused, they are beginning to target and reward those workers who demonstrate a real commitment to making positive lifestyle changes.”
Here's what Towers Watson found:
53% offer financial incentives for employees enrolled in health engagement activities
37% reward only employees who meet the company’s requirements for completion of a health engagement activity,
29% only reward members who participate in multiple activities
Employers hold employee health habits and lack of engagement largely to blame for cost increases, and feel vendors are ineffective at getting this behavior to change.
TowersWatson just released results from their 15th Annual National Business Group on Health/Towers Watson Employer Survey on Purchasing Value in Health Care. The study finds that employer health plan costs are projected to increase 6.5% for 2010, down from 7.0% in 2009, but still more than double the inflation rate. The study also found that in response, 83% of companies have already revamped or expect to revamp their health care strategy within the next two years, up from 59% in 2009.
Ron Fontanetta, a senior consultant at Towers Watson tells us, “the downturn has amplified the pressure on companies to find ways to support effective health management programs under budget constraints. For employers, the current environment is a clarion call to adjust their health plan strategy, reassess vendor relationships and aggressively address the challenge to encourage workers to become better advocates for their own health.”
Perhaps most interesting was employer listings of the top three challenges to maintaining affordable benefit coverage. Of eleven responses summarized in the survey report, the three responses listed the most were: Employees Poor Health Habits (67%); followed by a tie between High Cost Catastrophic Cases and End of Life Care (41%) and Underuse of Preventive Services (41%.)
So then Employers where asked, what were the top three obstacles to changing these poor employee health habits: of thirteen responses summarized in the survey report, the three responses listed the most were: lack of employee engagement (58%); lack of financial incentives to encourage participation in programs (31%); and lack of adequate budget to support health management programs (30%).
Other findings from the survey include:
Regarding Consumer Driven Health Plan adoption: 44% said they had already done so with no further action needed; another 9% have adopted but plan to take additional action; 14% plan to adopt in the next two years; and 34% don’t intend to adopt.
23% have already consolidated health and productivity programs with a single vendor or health plan with no further action needed; another 8% have done so but plan to take additional action; 13% plan to do so in the next two years; and 57% have no plans to do so.
93% had no intention of reducing or eliminating health promotion programs; and 78% had no intention of reducing staff dedicated to health benefit programs.
57% had confidence in the future of employers as health benefit sponsors, compared to 62% in 2009 and 73% in 2010.
69% are auditing or reviewing health plan eligibility; 66% are using incentives to encourage completion of health risk appraisals; 57% are using claims analysis of data in a warehouse; 56% offer health coaching; and only 19% are reducing pharmacy copays for those with chronic conditions (a value based purchasing initiative)
Employers feel vendors aren’t that effective in changing member behavior: 67% said they were not at all or just slightly effective in driving more efficient member use of services; and 66% said they were not at all or just slightly effective in changing member behavior to make more health lifestyle decisions.
The KFF/HRET Annual Survey of Employer Sponsored Benefits and Smaller versus Larger Group Premium Costs
Results were recently released from The Kaiser Family Foundation and Health Research & Educational Trust Annual Survey of Employer Sponsored Benefits. This year’s 214 page document is a must read if you want a statistical photo album, as opposed to a snapshot, of employer health benefits landscape.
While the KFF/HRET is rightfully one of the most often cited, and leading sources for employer health benefit statistics, the results occasionally contain data that seems counter-intuitive. Digging through this year’s document, the comparison of smaller versus larger employer group premium costs raises such a red flag.
Intuition would guide us to believe that larger employer groups would experience lower premium costs and lower premium increases. Historically, a wide number of studies from national benefit consulting firms have borne this out.
But the 2008 KFF/HRET survey tells us that premiums are now cheaper for smaller firms (3-199 workers) compared to larger firms (200+ workers), with the average monthly single premium at $382 for smaller versus $397 for larger firms (3.9% higher), and the average monthly family premium at $1,008 for smaller versus $1,081 for larger firms (7.2% higher.) The report notes that in past years, any differential was not so significant.
What gives? It of course is always tempting in such situations to dismiss the information as a result of skewed data and a faulty survey. But who are we to know that this is case? Instead, the answers may still be in front of us. The report doesn’t specifically respond with answers to this vexing question, but it does supply enough detailed data to offer some explanations, if you dig one level deeper.
And in digging, it would appear that the difference could be due to benefit packages, plan funding, and demographics.
When broken down by plan of benefits, smaller firm premiums are actually more expensive for a number of categories (Family HMO, Single PPO, Single and Family HDHP) and the differential is not as pronounced where larger firms are more expense (3.2% higher for Single HMO and 2.4% higher for Family PPO) except for POS premiums, which don’t have that significant of enrollment.
Thus part of the explanation for less expensive smaller firm premiums could simply be in the mix of benefit packages (HMO vs PPO vs HDHP etc) for smaller firms vs larger firms. On top of that, a good portion of the explanation could be in the level of cost sharing, which impacts premium costs. For example, the average Single PPO deductible for smaller firms was $917, compared to $413 for larger firms.
Another component of the explanation may be in that self-funded plan costs are running higher than fully funded plans. The report indicates that family self-funded premiums average 6.2% higher than fully funded premiums. The report also tells as that only 12% of smaller firms have some level of self-funding compared to 77% of larger firms. Furthermore, more large firms are trending towards self funding. 62% of workers with employers having 5,000+ employees self-funded in 1999, increasing to 89% in 2008, and 62% of workers with employers having 1,000 to 4,999 employees self-funded in 1999 compared to 76% in 2008.
Lastly, demographics can provide some of the explanation. Larger groups tend to have a slightly older population, and the report indicates that firms with less than 35% of workers aged 26 or under had 6.7% higher premium costs than firms with more than 35% of workers aged 56 and under. Larger groups tend to have workers with higher wage levels, and the report indicates that firms with less than 35% of workers earning $22,000 or less had 8.3% higher premium costs than firms with more than 35% of workers earning $22,000 or less. Lastly, larger firms tend to be more unionized, and the report indicates that firms with at least some union employees had 4.3% higher premiums than firms with no union employees.
The point of all this digging is to demonstrate, when considering reports as valuable of the KFF/HRET annual survey, not to just browse through the summary and walk away with a headline that smaller groups now have lower premiums than larger groups, as some news organizations have done, or to dismiss the survey as flawed, as some pundits have done. Digging through the data can yield explanations, which would seem to indicate that on an apples-to-apples basis, small groups aren’t really cheaper. Instead, small groups have higher cost sharing, a different mix of benefit plans, less self funding and demographics that make them “apples” compared to large firm “oranges”, and the apples do cost less than oranges in this case.
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