Preview: Healthcare Benefits Changes Coming to Open Enrollment

Open enrollment season for healthcare insurance is just a couple of months away and it looks like employees need to fasten their seat belts and prepare for a bumpy ride. With an eye toward cost control and new healthcare reform requirements, employers are preparing to make changes to their healthcare benefits packages.  Look for more consumer-directed healthcare, more incentives for prevention and wellness, and across-the-board increases in deductibles, out-of-pocket maximums, and copayments for patient care and prescription drugs.

For providers the changes mean that patients will continue to be cost-sensitive in terms of prescription costs and medical care. Expect to see more shopping around for services like lab work and MRIs. . There will also be more of an emphasis on receiving preventive health services, such as mammograms and colonoscopies, which no longer have copayments, deductibles, or coinsurance.

But nothing in healthcare is really free, so insurers are looking to cover those lost copayments, and deductibles in other ways. In a survey conducted in June by the National Business Group on Health, a trade group of more than 300 large employers, businesses estimated that the cost of employee healthcare benefits would increase by 7.2% in 2012 or more than twice the rate of inflation.

Here's a look at some of the plan design changes survey respondents expect to implement to help with costs in 2012:

Annual benefits. In preparation for a ban on annual limits for essential benefits, employers are beginning to remove annual benefit limits for preventive and wellness services as well as mental health and substance abuse services.

Incentives. Employers are adding more services like weight management programs and increasing the average annual incentives for healthy lifestyles programs. Average incentives are expected to increase to $383 in 2012 from $303 in 2011.

Controlling costs. About 25% of the survey respondents identified increased employee cost sharing as the most effective way to control healthcare costs; 23% tapped consumer-directed health plans and 17% identified wellness initiatives as the most effective way to reduce costs.

Consumer-directed healthcare. There's growing interest among employers in adding CDHPs as an option to a benefits package. Some 56% said they will take that step in 2012. Only 17% said a CDHP would be the only option offered.

Cost sharing. About 54% of employers said they will increase the employee contribution to premiums. The spike in employees' costs will probably be less than 10%. Look for across-the-board increases in deductibles, out-of-pocket maximums, and copayments for patient care and prescription drugs.

Coverage tiers. More than one-third of employers use a four-tier design: employee, employee and spouse, family coverage, and employee spouse and children. But about 20% of employers are using a five-tier system that takes into account the number of children in a family.

Pharmacy. Most employers will continue to use a three-tier formulary design. About 15% of employers expect to increase pharmacy copays but the increases will be less than 10%. To manage pharmacy benefits, employers will continue to rely on prior authorization, quantity limits, and step therapy.

Other techniques include mandatory mail order for maintenance medications and mandatory generic substitutions.

To manage specialty pharmacy benefits, most employers will continue to use prior authorization, utilization management, and step therapy. Some 40% will use a carve-out from the health plan, while 13% will use a four-tier benefit design.

Also, 39% of the survey respondents indicated that they require employees to pay the cost difference between generic and brand names drugs.

Retiree health benefits. To control retiree healthcare costs 45% of respondents are capping company contributions, 31% are increasing employee contributions and 18% are eliminating retiree health benefits for new hires.

In addition to plan design changes, employers are doing more than simply offering healthcare benefits, through on-site health clinics and wellness programs they are getting involved in maintaining the health of their employees to help reduce costs.

Although only 37% of survey respondents said they provided on-site clinics, the services provided at these clinics has expanded. Occupational health continues to be the mainstay, but clinics are adding chronic care management, health improvement programs, and acute and primary care for their employees.

This is just the beginning of significant changes expected in benefit packages as healthcare reform is implemented.

One question on almost every employee’s mind is whether employers will continue to offer healthcare benefits once federal health insurance exchanges open for business in 2014.The good news is that 71% of companies surveyed by Towers Watson, the benefits consultant, expect to continue to offer those benefits. Only 10% have made the decision to drop healthcare coverage; the remainder are undecided.

Employers that plan to drop coverage are still exploring their options in terms of how they will help their employees access insurance. One idea being floated is to provide a salary increase equal to the cost of benefits.