Balancing Act

The Affordable Care Act has triggered a rush on health care plan redesign, a process fraught with hidden costs and consequences.

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The Affordable Care Act has triggered a rush on health care plan redesign, a process fraught with hidden costs and consequences

Further down the hall in the C-Suite, finance is trying to hold down spiraling health insurance costs. In the meantime, company-compliance officers are struggling to bring their health benefits in line with the myriad, befuddling and costly requirements of the Affordable Care Act.

Welcome to the new world of employer-sponsored health insurance, an environment fraught with pressures, tough decisions and hidden consequences.

This intersection of recruiting, cost-saving and compliance objectives has management struggling for answers. So do the uncertainties of both the economic recovery and the rollout of the ACA.

“You have to deal with what’s real today. You can’t worry too much about what may happen tomorrow, because it’s all changing so fast,” says Diana Oslund, human resources director of Housecall Providers, a Portland nonprofit.

Gone are the days when the standard “preferred provider” health plan at work was pretty much all the choice anyone had. No one thought too hard about it, and most employees either slept through or skipped altogether the annual HR seminar on the benefits package.

No more. Now the triple objectives of recruiting/retention, cost containment and health care reform compliance have shaken the benefits landscape like a 7.0 on the Richter scale.

Health care reform requires companies of a certain size to offer plans that meet specific criteria or pay a penalty. That, along with cost-control efforts, has driven the plan-redesign frenzy. More than 80% of large employers have either redesigned their benefits plans or intend to do so within the next two years, studies have shown.

A redesign can be as modest as eliminating spousal coverage or as drastic as eliminating the company plan and shifting employees to a third-party administrator. Regardless of the magnitude of the redesign, the fact that it is happening across all businesses has raised awareness among workers about the cost of health insurance.

“The positive outcome of health care reform for employers is that employees are hearing more about what their employer pays for their health insurance,” says Renee Balsiger, the Portland office business leader for consulting firm Mercer. “Now they know employers will have to make changes. It means taking a personal responsibility for choosing cost-effective health care.”

With the economy going gangbusters, most firms are struggling to attract talent. Evidence suggests they are loath to fall behind their competitors by cutting benefits too much. A MetLife study found that 72% of employers said their top benefits plan objective was to either retain or recruit talent, while only 37% said it was to control health benefit costs.

Companies carefully “benchmark” their plans against their major competitors to ensure their plans are neither too “rich” nor too lean. Tech companies are especially careful to stay competitive, given the hiring frenzy in the industry today.

“Every year they go out and look at the industry, see what the packages are like and make sure we’re competitive,” says a Tektronix employee who asked not to be named. “They survey the landscape. If they didn’t, they might shove it down or increase when there’s no need. They need to strike that balance for retention/recruitment.”

Tektronix declined to comment on its benefits package.

If a company competing for talent redesigns a plan too radically, it can mean the loss of a coveted current or potential employee. Brian Gaudreau, a board member for the Portland-based nonprofit Pacific Northwest Software Quality Conference, was consulting for T-Mobile in early 2014, hoping to on-board. But then T-Mobile “downgraded its health benefits package so that it was no longer cutting edge. They got a good deal on a plan. but it was a high deductible with pre-approvals needed.” Gaudreau quit the consulting gig to take a full-time position with Seattle-based Avanade.

Smaller companies can tweak their plans to give them an edge in recruiting. Increasingly, they are offering “voluntary benefits” as part of their health benefits package. These are menu items employees can choose to “buy” as part of their plan. Pet insurance, for example, has been a hit as a voluntary benefit with some companies in dog-mad Portland.

Even as companies keep a careful eye on the health packages offered by their rivals, they are still, as a group, shifting the cost burden to their workers.

Employers can realize huge savings by simply manipulating the employee’s part of the overall cost of the package, and by eliminating elements such as spousal coverage or dental plans. Many have turned to the consumer-directed, or high-deductible, health plan (HDHP) because it can offer a 20%-plus savings over the traditional preferred-provider plan.

These plans typically feature a modest premium with a high deductible plus a health savings account. Mercer’s Balsiger points to a recent Mercer study showing that 41% of employers currently offer HDHPs — 26% of employers with 10 to 499 employees and 48% among those with 1,000 to 5,000. She says growth is fastest among the 10 -to – 499 sector, where “controlling health insurance costs are critical.”

Neuman Hotel Group in Ashland began to offer the consumer-directed model plan in an attempt to contain costs while still offering a strong benefits plan. “It was a huge learning curve for our employees,” says Jeannette Trumm, human resources director for the 300-employee company. “We had to do a lot of education. But it’s been very successful for us.”

As a cost-containment measure, Neuman did increase the employee share of the cost of its preferred provider option, and employees must now pay for spousal coverage. In part the changes were made to encourage employees to select the consumer-directed plan. “That was the toughest decision, to make those changes,” Trumm says.

But the HDHP may not be for every employer. “There’s no disputing the high- deductible plans have grown in popularity,” says Tami Simon, global practice leader for Buck Consultants in Washington, D.C. “But companies need to ask themselves what is their people strategy, who are they trying to attract, what part of the country are they in, who are the insurers, and so on. There are so many factors that go into making a smart choice about program design.”

Among the factors that can’t be ignored are the mandates imposed on company plans by the Affordable Care Act. Compliance with the act has been a nightmare for companies, resulting in higher administrative costs and employer plan requirements that drive up expenses.

Besieged with complaints from employers, the federal government continues to push back the deadlines for many of the elements of the act, further disrupting businesses’ efforts to comply.

“The inconsistencies around deadlines and guidelines are what make the ACA so frustrating to deal with,” says benefits consultant Deborah Tompkins of Tompkins Benefit Group in Portland.

Apart from compliance, employers and employees now have more choices to make when it comes to offering, and accepting, health insurance. Under Obamacare, employers don’t have to offer spousal coverage if a working spouse has access to health coverage elsewhere. However, axing an employee’s partner from the plan can have negative attitudinal consequences.

Employees must shoulder far more responsibility for their plan choices than ever before. They have to make decisions about what their plan will look like. Make the wrong choices and one’s health care bills could lead to bankruptcy.

With insurance available through the state and federal exchange system, for example, an employee might decide better coverage is available through the exchange, especially if one’s employer has increased the employee share of the plan cost. But many exchange plans have “narrow networks,” meaning they may not include one’s trusted health care providers in their networks.

In the current environment, as recruiters battle for high performers, bean counters bark for health plan cost sharing and regulations continue to roll out, there’s no respite in sight for benefits plan managers. But one thing is certain: If and when the dust finally settles, Americans will know a lot more about the cost of medical care than at any other time in history.