Key health care and benefits trends to watch in 2014
By Tye Elliott
These changes make it even more important for employers and employees to know how to best manage health care costs and make smart benefits choices. Helping clients understand the ramifications of the health care law is a great return on investment for brokers when counseling them on benefits options.
The past year may have thrown many brokers and agents a curveball or two. This year, benefits issues are anything but status quo. Many producers were challenged with helping clients navigate the changing health care landscape while providing benefits solutions with minimal impact to the bottom line. To get a jump start on the 2014 benefits season, here are five key trends to watch.
1. Increased accountability for controlling health care costs
With health care costs continuing to rise, consumer and provider accountability are garnering attention as solutions for managing costs. With confusion surrounding the health care law, brokers can prepare their clients for what to expect. For example, the Affordable Care Act (ACA) allows companies to charge different insurance rates (up to 30 percent) based on employee participation in wellness programs, and companies can charge higher rates for individuals who use tobacco.
According to the 2014 Aflac WorkForces Report, 3 in 4 employees (79 percent) say they would be willing to change their lifestyle habits if their employer rewarded them with lower premiums, and 87 percent think it’s fair for their employer to give employees incentives to become healthier. Whether or not employees are doing this to simply hang on to more of their paycheck, there is no denying the importance of individual accountability. Even hospitals and insurers are working together to move their pricing models to value-based options, and companies are beginning to make strides with bundled pricing to keep costs under control. The continued growth of this trend could result in more predictable and controlled costs for employers.
2. Emerging private insurance exchanges
Privately run exchanges offer a one-stop shop for buying employer-provided health insurance. These exchanges are often seen as an unintended side effect of the ACA, but they’re presenting employers with a simpler way to offer comprehensive worksite benefits. Brokers’ roles are going to shift. Brokers can prepare for the advantages, as well as the threats, that are offered by private insurance exchanges.
See also: PPACA and voluntary benefits: It’s a lot like fishing 3. The importance of a financial safety net
As employees assume greater responsibility for their health care choices, a need for a strong safety net to protect their finances is even more critical. In 2014, health care costs are expected to take another $181 (6.9 percent) out of take-home pay, and annual salary increases are not keeping up (just 3 percent).1 Even if employees are covered by a comprehensive major medical plan, out-of-pocket expenses can be substantial if the employee or a family member has a serious injury or illness. According to the Aflac study, 42 percent of workers are not at all/not very prepared to pay for out-of-pocket expenses not covered by major medical insurance, related to a serious illness or accident.2 Voluntary insurance plans can offer a safety net to protect the policyholder’s assets.
More specifically, many people are uneasy about their new health care responsibilities. Approximately 2 in 5 U.S. workers (43 percent) at least somewhat agree they will have a difficult time managing their own health care coverage and decisions because they already have difficulty saving and sticking to a budget today. Also, 51 percent at least somewhat agree they would prefer not to have more control over their health care expenses because they do not have the time or knowledge to effectively manage them.2
With this in mind, voluntary insurance benefits will continue to be a key way for businesses to help employees protect themselves from increasing out-of-pocket costs. These policies can be offered at little or no cost to a company’s bottom line and help pay for costs that major medical insurance won’t cover.
4. The cost of inadequate coverage
Benefits decisions don’t just impact employees; employers can be affected by not choosing the right offerings. During the coming months, benefits strategies will be top of mind not only for HR leaders, but for executive and financial leadership. With the possibility of big fees and penalties on the horizon, employers are bracing for what’s ahead. Brokers should counsel clients on which parts of the laws and fees will affect their businesses. Finance executives are more involved with benefits decisions than they were five years ago.1 Also, 64 percent of employers say they are now using a broker or benefits consultant to determine their benefits options.2
Employers need to make critical decisions regarding whether or not to offer health insurance to all full-time employees and their dependents, or face substantial penalties in 2015; there’s also a $63-per-covered-individual Transitional Reinsurance Program fee in 2014 and a 40 percent Cadillac Tax on high-cost health plans scheduled to take effect in 2018.
These changes make it even more important for employers and employees to know how to best manage health care costs and make smart benefits choices. Helping clients understand the ramifications of the health care law is a great return on investment for brokers when counseling them on benefits options. Building trust with clients can translate into greater sales, so it’s in brokers’ best interests to become credible advisors who are knowledgeable about the changes. 5. Planning ahead for the next generation
As the baby boomer generation cautiously moves toward retirement, millennials are taking on managerial roles. Between 2008 and 2013, 87 percent of millennial managers took on their managerial role, while only 38 percent of Gen-X managers and 30 percent of baby boomers did the same — which was nearly the reverse during the previous five years.3
The millennial generation (or Gen Y) is not only an important market to consider — and the future of the workforce — but also a demographic that requires a deeper understanding among agents, brokers and HR professionals.
Companies are beginning to embrace and adapt to millennials. Employers are taking measures to adjust retirement, engagement, training and communications programs to account for a changing and more transient workforce. Learning their needs, mindset and buying preferences is critical to converting millennials from the free-spirited uninsured to the knowledgeable and protected insured.
Be ready for change
As with many industry changes, producers are strongly encouraged to adapt to the evolving health care landscape or risk being left behind. Keeping these trends in mind and taking a holistic, consultative approach can help brokers prepare for the next phase of the benefits season and offer their services in even stronger ways than before.
1 Towers Watson (2013). 2013 Health Care Changes Ahead Survey. Accessed November 20, 2013
2 2014 Aflac WorkForces Report, a study conducted by Research Now on behalf of Aflac, January 2014
3 Ernst & Young (2013). The generational management shift. Accessed on November 21, 2013