4 Benefit Plan Adjustments to Help Employers Maintain Affordability
Providing health coverage for employees is among businesses' largest expenses, but with benefit plan adjustments, many HR leaders are finding ways to keep coverage affordable. The Affordable Care Act (ACA), which passed in 2010, mandated the expansion of health coverage to many who were previously ineligible. With that legislation comes the requirement for large employers to make health coverage available for employees, including workers who may have previously been considered part time (those working 30 or more hours per week or 130 or more hours per month).
Although new regulations have led to increased costs, large organizations are finding ways to adjust their offerings to keep expenses under control. According to the ADP Research Institute® Annual Health Benefits Report, employer-provided health care plans in the large-employer market are stable, and employers are adjusting effectively to the changes mandated by the ACA. The report showed that total health premium cost per employee rose 5 percent from 2014 to 2016, a moderate increase that was likely related to focused cost management by employers.
There are a number of plan adjustments that have been successfully implemented by large organizations. Here are four of the most valuable for your organization to consider.
- Employee Contributions: While employees at large enterprises have traditionally paid a portion of their health premiums, many organizations have increased the employee contribution amount to help offset costs for health benefits. Employee contributions rose almost 1 percent (0.9%) for employees under 26, and across the board, "employer contribution share increased for most age groups, only declining slightly for age groups 55 and older," according to ADP's Health Benefits Report.
- Self Funding: In 1974, Congress passed the Employee Retirement Income Security Act (ERISA), which allows employers to design and fund benefit plans tailored for their staff by setting up trusts that are managed by third-party administrators, according to the Department of Labor. Growing numbers of organizations have opted for self-funded plans, allowing them to cut costs and still provide employees with comprehensive health benefits.
- High Deductible Health Plans: Organizations have also started offering more high-deductible health plans, which provide lower premiums at the expense of higher deductibles, essentially passing more costs to the employee but encouraging employees to become more discerning consumers of health care. According to the Kaiser Family Foundation, employee deductibles have risen from about $900 in 2010 to $1,105 in 2015 (and even more — about $1,800 — for employees at firms with fewer than 200 employees). Often, high-deductible plans include health savings accounts (HSAs), which allow employees to save money for health costs in a tax-deductible account.
- Employee Health and Wellness Programs: Because much of health care spending is attributable to preventable illness or lifestyle choices, many employers have implemented health and wellness programs for employees to prevent potential health care spending. They may take the form of exercise classes at work, healthy eating challenges, fitness and nutrition education, smoking cessation programs or purchasing wearable fitness technology for all employees.
Although health care costs remain significant, and are not expected to decrease in the near future, employers can continue to provide comprehensive benefit plans without experiencing substantial cost increases. But HR leaders need to think creatively to develop strategies for cutting costs while keeping the needs of their employees in mind, whether by rethinking their benefits plans or working to prevent health spending by helping employees improve their health and wellness. By making the right benefit plan adjustments, employers can provide the health coverage workers expect without hurting the bottom line.
