Health Care Costs

The ACA and the Bottom Line

The Affordable Care Act has resulted in higher plan costs and more employers shifting costs to workers.
By: | October 28, 2014 • 5 min read

Even before President Obama signed the Patient Protection and Affordable Care Act into law in 2010, company executives began choosing sides. Some believed the PPACA would increase employee health care costs and financially cripple employers, while others hoped it would lower costs because the insurance pool would be expanded to include younger, healthier individuals.

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After four years, a survey from the University of South Carolina’s Darla Moore School of Business found that more than three-quarters (78 percent) of respondents are reporting higher health-insurance costs —  averaging 7.73 percent more.

Nearly four in 10 (37 percent) stated that their labor costs have increased — averaging 5.6 percent — as a direct result of the health-care reform law.

The results were based on responses from 213 chief HR officers at medium- and large-sized U.S. firms.

ACAchart

Shifting Costs to Workers

One major result of those increased costs has been a significant move toward consumer-directed health plans (CDHP). More than seven in 10 companies (73 percent) have already moved — or plan to move — to CDHPs, which typically call for high deductibles, according to the survey.

“Four to five years ago, insurance companies were [pushing] CDHPs as a way to introduce more market mechanisms into the health market,” said Patrick M. Wright, a professor in strategic HR management at the University of South Carolina, who directed the school’s annual survey.

At the time, he said, roughly 15 percent of surveyed employers adopted that strategy.

“That’s a huge jump. What the [Affordable Care Act] did is basically give companies carte blanche to launch CDHPs,” he said.

Employer-sponsored health insurance will suffer the same fate as pensions, practically becoming extinct — Patrick M. Wright, professor in strategic HR management, University of South Carolina

Recent headlines also coincide with the survey’s findings on the impact of the ACA on employers.

Starting Jan. 1, 2015, Wal-Mart will no longer offer health insurance to employees who work less than an average of 30 hours per week. More than 30,000 workers will be affected. Other retailers, such as Target and Home Depot, already have made similar decisions to eliminate health-insurance benefits for part-timers.

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And the impact of the law is still uncertain, since the ACA’s employer mandate was delayed until next year. The mandate requires that businesses with more than 50 full-timers provide health insurance or pay a penalty.

Wright said some employers are holding off from making any decisions until the mandate officially kicks in.

Strategies Required

He said the survey’s overall message to companies is that they will need to adapt to a new regulatory environment and figure out strategies to mitigate rising insurance costs.

Wright said he believes employer-sponsored health insurance will suffer the same fate as pensions, practically becoming extinct, as a growing number of companies seek to divorce health insurance from the employment relationship.

Despite the survey’s responses, others cite other reasons for rising health care costs.

“You have to look at your company, who you’re competing with and really make the case for what direction you’re going down the road.” —  Lenny Sanicola, senior benefits practice leader, WorldAtWork

David Newman, executive director at the Washington, D.C.-based Health Care Cost Institute, said other contributing factors include the recession and a long history of health care inflation.

He also noted that high-deductible health plans were growing in popularity even before the ACA was passed.

Newman also said that survey results do not always paint an accurate picture. There’s often a “disconnect” between how people respond on surveys and their ultimate actions, he said.

For example, he said, many employers vowed to drop health insurance if the ACA became law. Instead, they adopted a wait-and-see attitude.

Likewise, survey results can differ. According to the 2014 Employer Health Benefits Survey by the Kaiser Family Foundation, there were modest increases in average premiums — 3 percent for family coverage and 2 percent for single coverage.

But whichever numbers you look at, he said, increases are much lower now than in previous years.

“We can speculate to our heart’s content,” Wright said. “I would be looking more at whether the recession has structurally changed health care in some way to keep costs lower than we’ve historically seen.”

Impact on Employees

As more employers shift toward CDHPs, Wright said, each organization should challenge themselves to make such plans affordable to minimum- or low-wage workers who lack savings or live paycheck to paycheck.  How can they pay a steep $4,000, or higher, deductible?

Employers must also question the role health care in the company’s employee-value proposition, said Lenny Sanicola, senior benefits practice leader at WorldAtWork in Scottsdale, Ariz.

For instance: Is health care insurance a magnet or differentiator? Will dropping insurance and paying a penalty be a better alternative? What will the impact be on employee relations or attraction and retention? Will employees expect a bump in pay?

“You have to look at your company, who you’re competing with and really make the case for what direction you’re going down the road,” he said, adding that the University of South Carolina survey validated much of what he’s seen in other surveys or heard from employers.

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Companies that decide to stay in the health care game need to explore options or develop innovative strategies to manage costs, he said.

Sanicola offers several to consider: Implement wellness initiatives with incentives, introduce spousal surcharges, pay less for dependents but more for individual coverage, or create reference-based pricing where the company only pays the average price for procedures or tests such as MRIs.

He said many large companies also contract with hospital systems and providers to deliver quality care at lower costs for big-ticket items such as knee or hip replacements.

Employers should prepare themselves to thoroughly explain any changes in health plans, especially CDHPs, which may require some handholding, he said.

In addition to providing vendor hotlines and conducting face-to-face meetings, he said, companies can train a handful of employees to act as ambassadors — to address questions from co-workers. Employers should also consider extending access to spouses — who often make family decisions.

Many companies continue to struggle in helping to educate employees to be better health care consumers.

They need to do “a better job of giving people tools to help them price out [services]  . . . and navigate the system,” said Sanicola. “That’s really half the battle.”

Carol Patton is a long-time, versatile journalist. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]