IRVINE, CA (Dec. 20, 2010 - A harsh business climate and explosive health care costs failed to deter companies from maintaining and even expanding employee health benefits coverage this year. From its vantage point at the forefront of benefits trends, Burnham Benefits Insurance Services, a leading employee benefits consulting and brokerage firm based in Orange County, Calif., offers expert analysis of the top 10 trends of 2010 and how employers will continue to balance the health care needs of the workforce with economic realities in a new era of government regulation of health insurance.
"Companies remain fully committed to providing critical health care to employees and their families, even as they seek to lessen the financial burden that comes with benefits programs," says Kristen Allison, President of Burnham Benefits. "In these challenging and uncertain times, businesses have found innovative ways to meet demand for benefits that not only reduce their short- and long-term expenses, but also keep employees healthier and more productive."
1. Healthcare Reform. The Patient Protection and Affordable Care Act of 2010 (PPACA) shook the health care world this year, causing companies to revisit their benefits strategies to determine efficient ways of becoming compliant with the reform's immediate and long-term requirements. Chief among their considerations was whether plans could be grandfathered and how to best explain the changes to an anxious workforce in light of new communication and reporting responsibilities. On the upside, companies began to explore new benefit design opportunities by becoming engaged in financial modeling and benefit strategy development as they prepared for the many changes that will go into effect from now until 2014.
2. Cost Sharing and Rewarding Healthy Lifestyles. Employee benefit contribution structures held steady over the past decade -- even during the height of the recession, when companies froze wages and cut other expenses to prevent layoffs. This year's rise in salaries, however slight, combined with premiums that jumped 12 to 15 percent, saw companies sharing health care's financial burden with employees. Covered workers contributed on average two to three percent more for single and family coverage and bore higher out-of-pocket costs for deductibles and co-pays. To keep workers at the top of their game, companies are increasingly taking advantage of carrier-sponsored wellness programs -- from weight loss and smoking cessation programs to gym memberships, virtual health coaching, nutrition classes, wellness newsletters and more. Savvy companies are pegging employee contributions to their participation in these initiatives, with financial incentives such as lower premiums and deductibles tied to the attainment of health benchmarks.
3. Plan Design. There's nothing like limited resources to inspire creative thinking. Budget-minded employers flocked to high-deductible health plans (HDHP) with health savings accounts (HSA) for cost savings and tax advantages -- namely, the elimination of the "use it or lose it" rule. Others cut costs with HMO deductible plans. Limited medical networks and increasing prescription plan deductibles provided additional avenues for saving money. Expect continued innovation in 2011, as employers focus on new ways to get the most for the money they spend on health plans.
4. Communications Game Plan. Confusion and uncertainty among employees over how they and their families will be affected by health care reform led companies to adopt proactive and innovative communication strategies to dispel misperceptions, alleviate fears and prepare workers for the changes to come. From reassuring messages and use of the company intranet to submit basic questions to HR staff to on-site education sessions hosted by brokers, smart employers brought clarity by providing critical information and timely updates. This trend will continue next year as organizations and employees across the country contend with the reality of reform as it continues to evolve.
5. Claims Analysis. While it is important to understand the financial performance of a plan and the financial justification of premiums, employers are using claims data to take more focused directions on plan design, wellness initiatives, and communication. The data mining of claims allows employers to weigh the financial costs and member impact of any changes to their plans and helps balance disruption and cost containment. Even a review of a group's top disease states or major diagnostic categories provides focus for wellness initiatives and opportunities to avoid claims, giving employers more control of their health care costs.
6. Chronic Disease Management. Alarming rates of chronic diseases like diabetes and heart disease are taking their toll on Americans' health and on employers' bottom lines, since companies bear much of the cost associated with treatment. A remarkably positive partnership has developed between companies and employees joining forces to improve their quality of life through health management and wellness programs. These targeted approaches to specific conditions (i.e., glucose levels, blood pressure, and cholesterol) and "knowing your numbers" through health screenings and health risk assessments, help companies stay ahead of the cost curve by offering preventive care to at-risk employees and disease management that encourages healthy lifestyle behaviors in those who receive treatment. Significant future savings in the form of avoided health care costs, reduced benefit and disability premiums, and improved morale, retention and productivity -- plus an overwhelmingly positive response from employees -- mean these programs are here to stay and will likely grow more extensive in years to come.
7. Self Funding. Self-funded health care, where the employer assumes the financial risk for benefits claims payments and manages and administers the plan, was an appealing alternative to fully insured plans this year because it reduces costs while improving cash flow. Look for growing interest among all types of employers in this model in 2011. With HCR community rated requirements, employers will be considering alternative funding arrangements to capture their favorable claim costs of their plan participants vs. subsidizing others.
8. Product Bundling. Employers capitalized on premium discounts offered by carriers that combine medical plans with comprehensive specialty benefits such as dental, vision, life and disability. With just one team to administer benefits and one premium statement, employers saved money through lower administration fees. Plus, the more employees enrolled and lines of coverage bundled, the greater the savings.
9. Going Online. Despite initial reluctance to use the Internet for benefit administration, most employers are jumping on the information superhighway, recognizing not only the willingness of employees across all demographics to use a Web interface, but also how online tools simplify processes for HR departments. Computer-based services such as online enrollment, downloading forms and documents, and access to benefit information and education are among the tech advances coming into daily use, while mobile-enacted information and services for the smartphone platform promise even greater efficiencies in the near future.
10. Executive Benefits. Executive benefits, an important tool for attracting and retaining talented staff, were a casualty of the economic downturn and new health care reform legislation, both of which put these programs under greater scrutiny than ever before. Many companies have had to weigh the competitive edge these benefits provide against the costs and risks they entail, and some faced with no choice but to set these policies aside as they struggled to stay afloat in challenging economic times.
"Perhaps the most important lesson of 2010 is that getting employees more involved in their medical decisions, expenses and overall health is a key to sustaining a financially viable, work-based benefits program," says Allison. "As for implications for the future, as the economy improves and the job market becomes vital again, companies with robust programs will have a significant advantage in terms of their ability to meet productivity goals and attract and retain desirable employees while they make significant inroads into improving the health of American workers and their families."