Organizations Drop Grandfathered Status to Control Costs, Many
Waiting to Take Action with Employees
Broker Publishes 2012 Health Care Reform Survey
Compliance with health care reform is already driving up costs for some
employers' group health plans, and a majority of employers expect price
increases to be passed on to employees, according to a health care
reform survey released today by the Willis Human Capital Practice, a
unit of Willis Group Holdings (nyse:WSH), the global insurance broker.
While only about a quarter of the responding employers have quantified
the cost of compliance within their health plans, a majority (nearly 56
percent) of those employers said the cumulative cost amounted to an
increase in cost; over 15 percent noted that the cost increase was
between two and five percent, and over 15 percent said that the cost
increase was more than five percent. Employers report that their most
significant cost drivers are the provision of adult child coverage up to
age 26 and the removal of the annual/lifetime limits for "essential
The Health Care Reform Survey 2012, available
here, outlines employers' perceptions regarding the Patient
Protection and Affordable Care Act (PPACA) and planned responses to
health care reform measures. In addition, the survey provides a current
snapshot about what actions employers believe other employers
will take in response to health care reform.
The survey represents the findings from a significant population,
including more than 2,300 employers of varying sizes, industry sectors
and geographic regions.
Key findings from the survey include:
Employers expect that similar employers will pass increased costs on
to employees: More than half of the responding employers felt that
other, similar employers would pass more of the cost for
dependent coverage on to their employees. One-third of respondents
thought other, similar employers would reduce coverage to the
lowest-cost package to avoid the "pay-or-play" penalty, and a majority
of employers also thought that wellness programs would be expanded in
scope. Finally, nearly two-thirds of the employers expected that
employee contributions would be increased.
Employers are waiting to communicate health care reform changes to
employees: Within the next 12 months, 40 percent of employers will
be reviewing their strategies for internally communicating benefit
Only one-third of employers have maintained grandfathered status
despite a desire to remain grandfathered: The rate at which
respondent employers have lost grandfathered status has far out-paced
the Department of Health & Human Services' expectations for 2012. The
accelerated loss of grandfathered status suggests that employers have
had to make many plan changes to offset cost increases, and perhaps
employers have been more willing to give up grandfathered status in
order to take other steps to control costs.
"Now that the health care reform act has entered the implementation
phase, the costs and benefits associated with the act are coming into
greater focus for employers," said Jay Kirschbaum, Practice Leader -
National Legal and Research Group, Willis Human Capital Practice. "The
survey suggests employers realize that costs of providing medical
benefits will increase and that they will likely have to pass those
costs on to their employees."
"The survey also suggests that, despite the increased costs, employers
continue to value providing medical benefits to their employees and do
not plan to eliminate that benefit but are considering the possibility
that the state exchanges will provide a potential option. Respondents
also indicated the new requirements will force them to think about their
benefits in a strategic manner and as part of the total rewards they use
to attract, retain and motivate employees," Mr. Kirschbaum said.
The survey was conducted between Dec. 8, 2011 and Dec. 19, 2011.
Willis Group Holdings plc is a leading global insurance broker. Through
its subsidiaries, Willis develops and delivers professional insurance,
reinsurance, risk management, financial and human resource consulting
and actuarial services to corporations, public entities and institutions
around the world. Willis has more than 400 offices in nearly 120
countries, with a global team of approximately 17,000 employees serving
clients in virtually every part of the world. Additional information on
Willis may be found at www.willis.com.
Willis Group Holdings plc