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5 big changes employers will make to health care plans in 2015

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A significant number of U.S. employers are taking immediate steps to avoid triggering the excise tax on high-cost health plans when the levy goes into effect in 2018, according to new research.

Aon Hewitt’s soon-to-be-released Pulse survey of 317 U.S. employers finds that 40 percent expect the excise tax to affect at least one of their current health plans in 2018. And 14 percent expect it to immediately impact the majority of their current health benefit plans.

Surprisingly, a quarter of employers say they haven’t yet determined the impact of the tax on their health plans. And more than one-third report that their executive leadership and finance teams have limited or no knowledge of the implications of the tax for their organizations.

5 significant changes

Of those employers that have determined the impact, 62 percent say they are making 5 significant changes to their health plans for 2015:

  1. One-third (33 percent) are reducing the richness of their plan designs through higher out-of-pocket costs, including 10 percent that say they will eliminate high-cost, rich design options.
  2. 31 percent are increasing the use of wellness incentives in their plans.
  3. 14 percent are evaluating private exchange options for pre- and post-65 retirees, while 7 percent are considering private exchanges for active employees.
  4. 14 percent are significantly reducing spousal eligibility or subsidies through mandates or surcharges.
  5. 5 percent are implementing narrow/high performance provider networks.

“While the excise tax provision of the Patient Protection and Affordable Care Act doesn’t go into effect until 2018, it is accelerating the pace of change for U.S. employers,” says Jim Winkler, chief innovation officer for Aon Hewitt’s Health business. “Over the next few years, employers expect to use both traditional and innovative tactics to make substantive changes to their health plans to minimize their exposure to the tax and put them on a path to lower rates of health care cost increases.”

Due to medical costs expected to rise more rapidly than the tax thresholds in the future, 68 percent of the employers Aon Hewitt surveyed expect the excise tax to affect at least one or the majority of their current health plans by 2023.

When asked about future actions they are likely to consider to minimize their exposure to the tax, 8 in 10 (79 percent) expect to reduce plan design richness through higher out-of-pocket member costs. More than 40 percent of employers say they are likely or highly likely to adopt cost control strategies, such as reference-based pricing and narrow provider networks.

Other strategies employers are likely or highly likely to consider include:

  • Restructuring coverage tiers to align with tax threshold ratios (37 percent)
  • Limiting FSA, HSA and/or HRA contributions counted against thresholds (31 percent)
  • Limiting buy-up options for employees (26 percent)
  • Moving to a private health exchange (16 percent)

Aon Hewitt’s survey revealed that an overwhelming majority of employers — 88 percent — favor repeal of the excise tax. However, just 12 percent of employers say they have taken public actions, either directly or through a third-party industry organization — to express opposition to the tax.

Just 2 percent of employers say they are likely or highly likely to consider eliminating employer-sponsored health care coverage as a strategy for minimizing their exposure to the tax.


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