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LIMRA INSIGHTS

Limra: Employers' Aca Uncertainty Leads To Lack Of Planning

With key parts of the Affordable Care Act (ACA) about to take effect, employers are facing many uncertainties.

A 2013 LIMRA survey of mid- and large-size employers found that half the respondents expect health care reform to have a negative impact on their overall business in the next three to five years. These negative expectations, however, are only perceptions because so many of them have not begun to plan for the changes.

Four out of 10 employers stated they expect an increase of at least 11 percent in annual medical benefit costs. The most common strategy to address increases is to adjust compensation packages and benefit strategies to contain costs and shift more responsibility to employees. (This is especially true for employers with a negative attitude of the reform’s impact.)

One-quarter of employers say they have increased employee contributions in the past. Another third is planning to increase employee share in the next three to five years. Half of the employers surveyed have already increased deductibles/co-payments or plan to increase them in the near future. Employers also plan to reduce coverage for spouses and dependents.

While health care reform specifically highlights the importance of wellness initiatives, employers are still not fully engaged in these programs. Only 40 percent of employers offer a wellness program, but less than half measure their return on investments. Employers who focus on cost-shifting benefit policies tend to pursue wellness programs more.

These methods of cost containment reflect the employer’s experience before health-care reform. The reform has accelerated the need to revise compensation strategies for the long haul. The survey revealed that more than 60 percent of employers said they have not started or were not sure about longrange planning for the effects of health care reform.

Understanding where employers stand when it comes to long-range planning is the determining factor of their attitudes toward employee benefits. Employers who have started long range planning are likely to implement the most robust measures, such as making multiple design changes to medical plans, switching to consumer driven plans exclusively or shifting to a defined contribution model. They also see nonmedical benefits as a potential trade-off if needed to keep their medical plans viable.

Even among employers who believe that health care reform will have little or no effect on their ability to offer nonmedical benefits in the next three to five years, half say they are considering the elimination of at least one nonmedical benefit they currently offer. Of this group, half are considering eliminating more than one benefit.

The most troubling group is the 60 percent of employers who said they have not started or don’t know about longrange planning for health care reform. The smaller the employer, the less likely they are to have a long-term plan.

This lack of long-range planning has significant implications. As stated earlier, many employers assume that health care reform will have a negative impact on their overall business in the next three to five years, yet they cannot identify the reform’s exact impact.

Also, a majority of employers who currently have their medical plans grandfathered expect to keep this status going forward. At best, this notion is unrealistic. Moreover, it gives employers a false sense of immunity to many outcomes of health care reform.

Attempting to gauge their stance on whether or not they will stay in the benefits marketplace, these employers often hide behind the perceived safety of a “don’t know” attitude. While certainly a legitimate way to express their overall confusion about the implications of health care reform, it also shows that when confronted with reforms in the benefit marketplace, many employers do not have sufficient training and tools to address critical benefit issues in a timely way.

Might insurance exchanges ease some of the uncertainty? That’s difficult to say because even if exchanges prove to be successful, they are currently defined to offer only medical and dental (or vision) benefits, leaving employers as the primary outlet for obtaining other group non-medical benefits.

In order for carriers to be successful in the post-ACA world of employee benefits, they should consider these actions:

  • Identify and start to develop different strategies based on the possible outcomes of the ACA on both employers and employees.
  • Educate employers and producers about the need for taking a strategic and long range approach to their benefits.
  • Share knowledge on wellness programs and insurance exchanges.

While little attention has been given to the longer term effects ACA may have on employers, there is an opportunity for carriers to help them navigate the new landscape.


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