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U.S. Employers Evaluating Benefit Plan Strategies

Last week, Mercer released preliminary results from its annual national survey of Employer-Sponsored Health Plans 2014, which discussed health benefit cost expectations for 2015.  Some of the key findings of the survey included:

  • Health benefit costs per employee will increase ~3.9% on average in 2015 or ~5.9% if employers make no changes to their health plans for 2015
  • Around 32% of employers surveyed will renew their existing plans without making changes
  • Around 3% of employers will offer of CDHP within three years.

Healthcare reform is forcing employers to evaluate their benefit plan strategies.  As the shared responsibility provision comes into play, enrollment will increase further and cause employers to spend more if they stick with traditional methods.

To address the rising cost of healthcare while remaining compliant with legislation, employers are implementing alternative methods of providing health insurance to their employees.  One method includes offering high-deductible health plans coupled with a health savings account; the other includes implementing a defined contribution model via private exchanges.

In the last year, private health insurance exchange offerings have gained considerable momentum in the market, and service providers are continuing to develop their offerings. For example:

Mercer is expanding the voluntary benefits available for employees, and can integrate or add a wellness offering among other things. For this year’s annual enrollment

Aon Hewitt is adding the following ten  elective benefits: Critical illness; Accident; Hospital indemnity; Life; Long-term disability; Identify theft; Legal; Home / auto insurance; Pet insurance. In its retiree exchange, Aon Hewitt has partnered with Picwell to add predictive analytics, which will allow advisors to organize and analyze ~900k variables that affect plan selection, including data related to claims, lifestyle, and pricing, and recommend the best plan for a particular individual.

Early adopters of health insurance exchanges come from a variety of industries.  The shared responsibility provision will result in an uptick from certain sectors that naturally have a high volume of variable-hour workers such as retail. But managing benefit costs is a problem experienced by all organizations, so many will find that an exchange is the viable long-term solution.

As the exchange space transitions from early adopters to first movers, service providers will inevitably continue evolving their exchange offerings to address legislation and new market demands, as well as appeal to a broader subset of clients. 

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