DALLAS — To combat rising health care costs and prepare for the 2018 health care reform law excise tax, many employers are changing their health plans and either implementing or experimenting with wellness programs.
The 40% excise tax on high-cost employer-sponsored coverage scheduled to go into effect in 2018 has consistently been the No. 1 concern of employers since the Patient Protection and Affordable Care Act became law in 2010, said Tracy Watts, a Washington-based senior partner and health care reform leader at Mercer L.L.C.
To avoid the “Cadillac” tax, employers must keep total health insurance costs below $10,200 for single coverage and $27,500 for family coverage under the PPACA four years from now, with some exceptions, including workers in high-risk professions and retirees who are not eligible for Medicare.
Some employers will attempt to keep costs under the limit by leveraging voluntary benefits, offering high-deductible health plans and limiting eligibility for coverage, Ms. Watts said.
United Parcel Service Inc. is one employer that has already limited its health benefits to unemployed spouses and spouses who cannot obtain coverage through their own employer, she said.
This year, 8% of employers had a spouse exclusion policy and 12% had a surcharge for spouse and family enrollment, according to a Mercer survey of more than 700 employers. The trend is likely to continue, Ms. Watts said, as 27% of employers are considering some type of spousal exclusion or surcharge in 2015.
Another way employers hope to lower costs is promoting healthy living through wellness programs, experts said during the WorldatWork 2014 Total Rewards Conference in Dallas.
According to Mercer's survey, 35% of employers have already implemented a wellness program and 47% are considering doing so.
Home Depot's approach
The Home Depot Inc. and Caris Life Sciences Ltd. are among employers that already offer wellness programs — from health risk assessments, fitness challenges and lifestyle coaching to disease management and smoking-cessation programs, their representatives said during the conference.
Home Depot began offering health risk assessments to employees in 2008, said Lesley Leiserson, the retailer's Atlanta-based director of benefits planning, design and communications. Its wellness initiative has expanded since then to spouses, and includes a tobacco-free incentive of $10 per biweekly paycheck, an annual health challenge, designated wellness champions and screenings for hidden health risks.
Ms. Leiserson said Home Depot works with Quest Diagnostics Inc. to screen employees and their spouses for “metabolic syndrome,” which occurs when an individual has high blood pressure, high triglycerides, low HDL cholesterol, high glucose levels and excess body fat around the waist.
People who have metabolic syndrome cost $5,732 in medical care each year, whereas those without the syndrome cost $3,581, according to an independent 2009 study, “Health Care Utilization and Costs by Metabolic Syndrome Risk,” said Wendi Mader, senior manager of product development for Quest.
Home Depot is considering moving to an outcomes-based ap-proach of rewarding employees for being in good health, improving their health over time or completing healthy activities, Ms. Leiserson said. The challenge is that people may not participate if they think they won't get the results they want, she said.
Caris also is hesitant to transform its successful wellness program into a results-based model, said Angela Martinez, human resources manager at the Irving, Texas, biosciences company.
Some employees have said, “"You're trying to track how much weight I gain,'” Ms. Martinez said. They're concerned that unhealthy behavior could increase their health insurance costs. “It's just like with car insurance. If you have multiple accidents, the rates go up,” she said.
According to the Mercer study, 20% of employers have moved to outcomes-based incentives. But Ms. Watts said it takes at least three years to make the shift. Employers need to ease workers into the idea by offering a health risk assessment and a biometric screening and providing education about outcomes, she said.
Some question wellness programs' return on investment, especially when it takes two to five years to see significant improvement, according to a recent survey by Buck Consultants L.L.C.
However, other conference speakers said the real payback is immediate in terms of increased productivity and engagement among workers.
“It's very hard to make a business case around investing in wellness and health improvement looking at short-term health care costs as the single goal,” said Integrated Benefits Institute President Thomas Parry.
Employers should pay attention to the broader outcomes of having a health-focused culture, “things like absence from work, disability, performance at work and ... productivity,” Mr. Parry said.