A major aspect of America’s new healthcare legislation are government-run online marketplaces, or exchanges, where individuals and employer groups can shop for health plans. But these public marketplaces are not so popular with the country’s firms, which worry about projected increases in healthcare expenses.
This is according to a Towers Watson 2013Health Care Changes Ahead Survey, which polled of 420 mid-size and large companies in the United States.
Under the Affordable Care Act (ACA), which was signed into law in 2010, public health insurance marketplaces will become available this fall. Run either by the federal or state governments, these virtual marketplaces provide access to insurance plans offered by private companies, according to the U.S. Department of Health & Human Services.
These exchanges are one-stop shops, allowing consumers to look in one place for all the plan options available in their area and then compare them based on quality, price and other factors. Public health exchanges are meant to make insurance more affordable through subsidies and tax credits for qualifying customers.
Public versus private health exchanges
Despite these advantages, the Towers Watson survey reveals that public health exchanges are not so popular among American employers. Only 30% of companies see them as a viable alternative to employer-sponsored coverage.
The more popular option, favoured by 58% of employers, are private health exchanges, which are not part of the ACA. Unlike public exchanges, private ones are created by private entities, such as insurance companies. And unlike the state- or federal-run public exchanges, private ones are already available to consumers.
Similar to public health exchanges, private ones can sell to both individuals and employer groups.
The reason why private marketplaces are seen as more desirable is that “employers are intrigued by [their] potential to control cost increases, reduce administrative burdens and provide greater value,” according to the Towers Watson survey.
As a result, companies say they will look to private exchanges as a potential delivery mechanism for their active medical plans, which 98% intend to retain for 2014 and 2015. “This arrangement enables them to maintain their role as plan sponsor, but outsource certain aspects of plan management to an exchange operator,” according to the survey.
But almost three-quarters of polled companies say that as they evaluate private exchanges for active full-time employees, they will want evidence that private options provide more value than the current self-managed model.
“The healthcare landscape is changing rapidly thanks to health reform, continued cost escalation, the emergence of health benefits exchanges, and new provider contracting and care delivery arrangements,” says Randall Abbott, a senior healthcare consultant at Towers Watson.
Excise tax
The survey also finds that more than 60% of U.S. employers fear that they will trigger the excise tax in 2018 if they don’t change their current benefit strategy. Under the ACA, the federal government will impose an excise tax of 40% on employer-sponsored health plans whose value is more than $10,200 for individual coverage and $27,500 for family coverage.
So in order to fight the increase in employee healthcare expenses and avoid the excise tax, almost 40% of employers plan to change their plan designs for 2014, according to the study. Apart from using employee wellness and health improvement programs, firms also intend to increase their use of supply-side strategies and vigorous vendor management techniques. For 2015 or 2016, American companies plan to provide their employees with outcome-based incentives.
Another change firms expect to make in 2015 is to end their plans for retirees due to the existence of exchange solutions for that population. The study shows that the percentage of employers that are somewhat or very likely to discontinue their employer-sponsored plan for retired employees who are over 65 will jump from 25% in 2014 to 44% in 2015.
And with the rise of public exchanges making new solutions available for pre-65 retirees, the percentage of employers that are somewhat or very likely to do away with their plan for that group will climb from 10% in 2014 to 38% in 2015.
Less change is anticipated for part-time workers. Only 11% of companies are contemplating changes to their total rewards mix or design for part-time employees, according to the survey. Many part-timers are likely to seek coverage through public exchanges.
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