Benefits

Employers: ‘No Sale’ on Private Exchanges

By Kelley Butler

Oct. 27, 2014

When Benz Communications and the National Business Coalition on Health set out to launch the Inside Benefits Communication survey, we would have bet decent money that we’d find two things:

1. The Affordable Care Act is going to have a major effect on how employers communicate their benefits.

2. Private insurance exchanges are going to get more than a passing glance from employers in the years to come.

After breaking down the survey results, it turns out our predictions are one for two.

The survey garnered responses from more than 300 HR/benefits professionals from across the country. (Full disclosure: I’m the editorial director at Benz and helped lead the survey project.) Respondents spanned a wide cross section of industries,sizes and geographic locations. On average, respondents largely are concentrated in the service and technology industries, located mainly in the Southeast and West. Most respondents have 1,000 to 5,000 U.S.-based employees.

Despite respondents’ diversity, they united to send us a clear message on our supposed “slam dunk” prophesies: While most (73 percent) report that the ACA will have the biggest effect on their benefits communication strategy in the year ahead, the majority (55 percent) also resoundingly reject exchanges as a benefits-delivery option.

You might be thinking, “Whaaaat?!”

I know. That’s what we thought, too.

However, the data don’t lie: In a stark departure from data results in similar industry polls,55 percent of survey respondents said they will “never” stop sponsoring employee health plans in favor of giving employees money to buy coverage through a private exchange. Only 5 percent already use a private exchange to provide employees’ health benefits, and just 8 percent are considering such a move within the next three years.

Respondents also went rogue — going off the beaten path of current industry data — when asked about their plan design strategies to comply with the ACA’s employer mandate and the so-called “Cadillac tax.”

When it comes to the employer mandate, HR/benefits practitioners said plan-design strategy will maintain the status quo. Nearly 40 percent of respondents said they are maintaining current benefit plans and coverage levels, without increasing employee costs — like deductibles, coinsurance and copayments. Although close to one-third (32 percent) indicate they will maintain current benefit and coverage levels while increasing employee costs, just 2 percent plan to reduce their number of full-time employees or reduce employee work hours.

As for the Cadillac tax, practitioners said the ACA won’t drive cost-shifting or other major health benefit changes. The tax, effective in 2018, imposes a 40 percent excise levy that penalizes employer plans valued at more than $10,200 forindividual coverage and $27,500 for family coverage.

Although consultancy Towers Watson found that 60 percent of large employers’ current health plans for active employees will be subject to the tax if they remain unchanged, slightly more than a quarter of survey respondents (26 percent) said they plan to maintain current plans and coverage levels without increasing employee costs. Another 20 percent plan to maintain benefit levels but increase employee costs; 15 percent said they will reduce benefit plans and coverage levels while also increasing employee costs.

So, what gives? Are HR/benefits practitioners fooling us, themselves or both? When it comes to how they’ll respond in the future to the ACA — along with the law’s cost burdens and communications challenges — I’m not certain status quo is a sustainable strategy, regardless of what the IBC data tell us.

I am certain, though, that employers can use the ACA as a framework to communicate the value of their plans in a positive light.

Now that the ACA makes health insurance available to everyone, health insurance is a commodity — just like auto or life insurance. That means companies have to compete for employees’ business just like everyone else. However, the emotional attachment to employer-sponsored coverage can be a benefit pro’s secret weapon. They can use that emotional sentiment to distinguish their plans from the consumer marketplace.

Action-oriented employers will use the ACA as an employee engagement opportunity, which will benefit both their companies and our country.

Kelley M. Butler is the editorial director at Benz Communications, an HR/benefits communication strategy firm. Before joining Benz, Butler spent 11 years at Employee Benefit News, including seven as editor in chief. To comment, email editors@workforce.com.

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