Prepare for a world without employer healthcare

2009

As the crumbling economy piles pressure on the bottom line, more and more US employers are taking a long and hard look at whether providing health insurance for their staff is something they can ill afford.

According to research by consultancy Hewitt Associates, nearly a fifth say they are considering stopping offering health benefits over the next three to five years.

This is a five-fold increase on the four per cent who said they would be withdrawing in a similar poll conducted last year.

Two factors appear to be coming into play here. First, with little sign that we have yet hit the bottom of this recession, costs are being squeezed and squeezed again, meaning firms have little choice but to look at this ongoing (and rising) expense.

But the healthcare reforms outlined by President Obama, even though his vision of affordable healthcare for all is still at a very early stage, are also encouraging employers to question whether there will be the same need in the future to offer a healthcare safety net to their workers.

The Hewitt poll of more than 340 employers found a sharp rise in the number of firms focused on driving down their healthcare costs, from 15 per cent in 2008 to nearly a third this time around.

Nevertheless, nearly two thirds said they were still committed to spending on healthcare and making a significant investment towards improving the health and productivity of their workforce, despite the troubled economy.

While just four per cent of the firms polled said they were already taking steps to enable them to stop providing healthcare benefits altogether, this rose significantly when it came to future intentions.

Although three quarters said they planned to focus on improving employee health and productivity in the next three to five years, a fifth said their strategy was now very much to move away from directly providing healthcare benefits.

Against the backdrop of the alternative healthcare offerings being discussed in earnest by the Obama administration, employers now saw stopping healthcare benefits and provision as a more viable option than it had been in the past, the survey added.

One of the worries here, of course, is that retrenchment, if it happens, could come just at the moment more Americans need access to healthcare.

Apart from the ongoing healthcare issues of the ageing population and obesity, mental health issues, such as stress and anxiety, are now troubling more Americans than ever.

And this week a survey of 1,000 workers by consultancy firm Lynn Taylor Consulting, for example, has found that employees are now spending nearly three a day worrying about their job security.

This anxiety was being fuelled by more managers holding meetings behind closed doors, a simple action that, even unwittingly, can fuel an explosion in gossip, rumour and fearfulness among staff.

In fact, more than three quarters of employees polled said this was often the first conclusion they jumped to when they saw their managers marching off into a behind-closed-doors meeting.

The good news for employees is, despite the grim economic outlook, the Hewitt study found that most employers were not planning to make drastic changes to their full-time and part-time healthcare benefits in 2010.

Instead, nearly two thirds said they were focusing more on changes such as shifting more of the costs on to employees while almost half said they reducing the number of benefit plans.

A third said they planned to shift their focus more towards wellness programmes, and almost 40 per cent planned to increase the prevalence of consumer-driven healthcare plans.

One of the key messages for managers, argued Hewitt, was that there were steps they could take to cut short-term costs without completely wiping out what they offered to employees.

These included being more aggressive in how they negotiated with health and welfare vendors, including looking for better discounts and pharmacy deals, reduced premiums and lower administration costs.

They could be more on the ball about issues such as whether plans were meeting participation level targets, clinical outcomes, claim costs and so on. They could also do more the measure the return-on-investment their programmes were providing.

"In today's environment, employers are under pressure to cut health care expenses, but they realise that short-term cost management tactics do not address the underlying drivers of health care cost," said Jim Winkler, head of Hewitt's North America Health Management Consulting practice.

"This leaves them with two options: making a long-term commitment to improving the health of employees and their families, or exiting health care altogether. Most companies believe that investing in the long-term health of their population is the most effective way to mitigate costs and create a more productive and engaged workforce," he added.

But if more firms did start to withdraw from offering healthcare, the net result was likely to be higher employee healthcare premiums or fewer benefit choices for those that stayed the course, added Jeff Munn, a principal in Hewitt's Health Management Consulting practice.