Many workers will soon find that their health insurance costs more and covers less next year, and that employers have taken a sharper interest in their well-being. Experts say the impact of a health care overhaul tax that doesn't start until 2018 is already being felt.
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Millions of employees are learning this month about changes in their employer-sponsored health coverage for 2015. Some of the adjustments are likely to stem from the looming tax, which will hit plans valued at more than $10,200 for individual coverage and $27,500 for families. Nearly half of employers with 5,000 or more workers will trigger this tax in 2018, according to the benefits firm Towers Watson. They'll find a bill that amounts to 40 percent of the total value of coverage that exceeds those thresholds.
And this is not a one-year concern. The thresholds rise over time, but they are expected to grow more slowly than health care costs. That means that more companies are expected to trigger the tax after 2018.
Employers have been adjusting coverage for years to contain rising health care costs, and the looming tax is speeding up this process. "The excise tax is probably accelerating the pace of change ... but it's not creating the change," said Jim Winkler of the benefits consulting firm Aon Hewitt.
Businesses are making adjustments for a tax that's more than three years away because it's preferable to phase in changes. Taking that approach helps avoid spooking employees and inadvertently pushing them to leave.
Almost two thirds of the companies in a recent Towers Watson study said that the tax will either moderately or strongly influence their health care strategies over the next two years.
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Here are four approaches your company may be implementing to reduce costs and limit its possible tax bill come 2018.
1. RAISE COSTS FOR WORKERS:
In a survey of more than 300 large employers by Aon Hewitt, 33 percent expected to raise out-of-pocket costs for their employees next year.
That means people may have to pay a larger deductible before most of their coverage kicks in, or a bigger bill replaces that tidy $20 co-payment at the doctor's office. It could also mean workers will pay a higher co-insurance, or the percentage of the bill leftover after the deductible is met.
Such adjustments can lower the premium or price of coverage for the employer, and they also can push employees to shop around for a better deal on care, which can further drive down costs.
2. ENCOURAGE HEALTHY BEHAVIOR:
More companies are dangling incentives, such as cash or penalties that can include higher premiums, to motivate employees to get screenings that measure things like their blood pressure or to fill out a health-risk questionnaire. These so-called wellness programs, which can evolve to include health coaches and gym memberships, won't cut costs next year, but employers think they can make a big difference in the long run.
For instance, an employee who learns that his cholesterol level has climbed into dangerous territory may start exercising, eating better and taking medications to improve it. That can stave off expensive care down the road.
"Employers certainly feel strongly that they need to get people engaged in trying to improve their own health," Winkler said.
3. TAKE A HARD LOOK AT DEPENDENT COVERAGE:
Your spouse will no longer be covered if he or she has an affordable insurance option from another employer. That's what some employees of the package delivery service United Parcel Service Inc. learned last year.
Benefits experts don't see a groundswell of companies attempting to copy that fairly drastic move, but more are considering surcharges for spousal coverage or reducing the amount they pay to cover adult dependents.
More companies may ultimately drop spouses from their coverage as 2018 approaches, depending on how close they are to hitting the tax threshold, Winkler said.
4. ADJUST PRESCRIPTION BENEFITS:
Prescription drug coverage may provide fewer medication choices or a narrower network of pharmacies.
For instance, it may become more common for a plan to offer a choice of two options instead of three for a particular prescription. Such restrictions give drug plans leverage to negotiate better prices and consequently, lower costs.
Companies also may tier their prescriptions and require higher out-of-pocket payments for more expensive drugs.