2014 Employer Health Benefits Survey

Section Fourteen: Employer Opinions and Health Plan Practices

Employers play a significant role in health insurance coverage – so their opinions and experiences are important factors in health policy discussions.  Employers continue to innovate on how they offer, structure, and deliver their benefits.  A considerable number of employers have developed strategies to reduce cost or improve quality through changes to their plan’s provider networks.

Employer Opinions on Cost Containment

Firms offering health benefits were asked to rate how effective several different strategies would be in reducing the growth of health insurance costs.

• Twenty-eight percent of firms offering health benefits stated that “wellness programs” would be very effective at containing health insurance costs, more than the percentage of firms indicating “tighter managed care restrictions”, “higher employee cost sharing”, “disease management programs”, “tiered provider networks” and “narrow networks”. The percentage of firms offering health benefits who thought that wellness programs would be very effective at containing health insurance costs was similar to the percentage who thought that consumer driven health plans would be very effective (28% and 22%, respectively) (Exhibit 14.1).
• Just six percent of firms offering health benefits stated that narrow networks would be very effective at containing health insurance costs (Exhibit 14.1). More firms offering health benefits indicated that narrow networks would be not at all effective at containing costs than any other strategy.
• Ten percent of firms offering health benefits thought that “tighter managed care restrictions” and 11% stated that “tiered provider networks” would be very effective at containing health care costs. Fewer employers offering health benefits thought these strategies would be very effective than either “Consumer-Driven Health Plans” or “Wellness Programs” (Exhibit 14.1).

Shopping for Health Coverage

More than one-half (58%) of firms offering health benefits reported shopping for a new health plan or a new insurance carrier in the past year, suggesting that the market is quite dynamic (Exhibit 14.3).  The largest firms, those with a 1,000 to 4,999 employees or firms were with more than 5,000 workers, were less likely to shop for a new plan or carrier.

• Among firms that offer health benefits and shopped for a new plan or carrier, 27% changed insurance carriers. There were no significant differences between small firms (3 to 199 workers) and larger firms (Exhibit 14.4).

Tiered Networks

A tiered or high performance network is one that groups providers in the network together based on quality, cost, and/or the efficiency of the care they deliver.  These networks encourage patients to visit preferred doctors by either restricting networks to efficient providers, or by having different copayments or coinsurance for providers in different tiers in the network.

• Nineteen percent of firms that offer health benefits include a high performance or tiered provider network in the health plan with the largest enrollment (Exhibit 14.5). This is similar to the 23% reported in 2013 and the 20% reported in 2011.
• Employers may use different criteria to determine which providers are included in which tiers. Fifty-nine percent of offering firms whose largest plan includes a high performance or tiered provider network stated that the network tiers were determined both by providers’ “quality and cost/efficiency”.  Large firms (200 or more workers) were most likely to indicated that the tiers are determined by both “quality and cost/efficiency” than any other response option, including “cost/efficiency” alone (15%) (Exhibit 14.6).

Narrow Network Plans

Firms with 50 or more employees offering health benefits were asked about the prevalence of narrow or skinny networks.  Narrow networks are plans which limit the number of providers who can participate to reduce costs.  Typically narrow network plans include fewer providers than a typical PPO or HMO network.

• Eight percent of offering firms with 200 or more workers indicated that they offered a plan they considered to be a narrow network plan (Exhibit 14.8).
• Six percent of offering firms with 200 or more employees said that the carrier (or firm) eliminated a hospital or health system from a provider network in order to reduce costs (Exhibit 14.8).

Reference Pricing

Reference pricing is a system in which plans pay a set amount for a service and the enrollee is responsible for paying the difference between the service and the cost the provider charges.  Reference pricing is intended to encourage enrollees to shop among providers for lower cost and/or higher value care.  The survey asked employers with 50 or more employees if their plan with the largest enrollment used reference pricing for ANY service.

• The largest health plan at 13% of offering firms with 50 or more employees includes reference pricing for at least a service (Exhibit 14.7).

Retail Clinics

Retail clinics treat minor illnesses and provide preventive care at locations such as retail stores, pharmacies, and supermarkets.  Among firms offering health benefits, over half (57%) cover care received at retail clinics in their plan with the largest enrollment.  Among these firms covering care at retail clinics, 8% offer financial incentives to receive care at a retail clinic location rather than at a physician’s office (Exhibit 14.9).

• Large firms (200 or more workers) are more likely than small firms to both cover care received at a retail clinic and offer financial incentives to seek care at retail locations (Exhibit 14.9).

• The percentage of firms offering health benefits whose largest plan covers care at a retail clinic and who offer financial incentives for doing so is statistically unchanged from 2013.

Private Exchanges and Defined Contributions

Recently there has been considerable interest in private exchanges.  An exchange is a marketplace for health insurance.  Private exchanges allow employees to choose from several health benefit options offered on the exchange.  A private exchange is created by a consulting company, rather than a governmental entity.   There is considerable variation in the types of exchanges currently offered; some exchanges allow workers to choose between multiple plans offered by the same carrier, while in other cases multiple carriers participate.  The exchange operator may establish strict standards for the plans offered or allow the insurers more flexibility in determining their plan offerings.

Private exchanges may or may not include a defined contribution for premiums.  A defined contribution is a set dollar amount offered to the employee by the employer. Employees may then select one of several plans, paying the difference between the defined contribution and the cost of their chosen health insurance plan.  This permits an employer to offer a larger variety of health plans to employees and to structure contributions or other rules to encourage employees to choose more efficient plans.

• Three percent of covered workers at large firms (200 or more workers) are enrolled at a firm which is currently offering health benefits through a private exchange (Exhibit 14.12).

• Thirteen percent of large firms (200 or more workers) offering health benefits are considering offering benefits through a private exchange. Among offering firms with at least 5,000 workers, 20% are considering offering benefits through the exchange (Exhibit 14.11).

• The percentage of large firms (200 or more workers) offering health benefits that are considering offering benefits through a private exchange is unchanged from last year. The percentage of firms with at least 5,000 workers considering a private exchange is down from 29% last year.

• Currently 12% of covered workers are employed at a firm that is considering moving to a private exchange.

• Twenty-three percent of large firms (200 or more workers) offering health benefits are considering using a defined contribution approach (Exhibit 14.11).