Read the following carefully; your employer is. This is an excellent example of buzzwords and bullshit and it’s coming at you in the next few years. Look at the claim of dollars saved and how they were saved. Does it make sense; $38 million saved because workers now have more choice and know about the employer contribution toward their coverage? The only way that $38 million could actually be saved for Sears would be a dramatic decrease in health care utilization or more costs shifted to workers because they now have fixed dollars from their employer and must select lower cost, higher out-of-pocket cost plans.
There is no “democratization” of benefits here; there is pensionization of health benefits which will have the same disastrous impact over time. Simply put, what is happening now to health benefits is exactly what happened to retirement benefits. The employer takes away the promise of a defined benefit and replaces it with a defined contribution such as with a 401k plan and now a defined contribution toward health insurance premiums. In both cases the worker is left picking up the slack further reducing their disposable income and diminishing their prospects for a financially secure retirement.
Sooner or later all this will force workers to delay retirement and negatively impact the workforce.
Sooner or later there will be more demands for higher taxes to pay for increased government-provided benefits to make up the shortfall. Sooner or later workers will demand higher wages to offset these cuts. Sooner or later employers may realize how God awful short-sighted and stupid they are. And make no mistake about it, federal laws and regulations are major contributing factors in all this.
Why am I so sure of what I say? Because I used to craft these strategies and write the glowing memos trying to turn lead into gold.
Juliette Mullin, Senior Editor
In the first year after Sears moved its employees into a private health insurance exchange, workers signed up for health plans that looked like the ones they had before. The next year, they shopped based on the price of premiums. But in year three, something interested happened: They signed up for the plans that offered the best value.
Now, Chief Human Resources Officer (CHRO) Dean Carter says Sears employees like the choices that a private exchange affords them—and it would be very hard to reverse that. And it’s saving the giant retailer a lot of money; in the first year alone, the company saved $38 million, he says.
Speaking at a panel at Wednesday’s Future of Health Care Summit in Washington, D.C., Carter said that “there isn’t a CHRO I know who isn’t thinking about private exchanges.” It’s one part of a major shift in how employers view health insurance benefits for employees in the retail health insurance marketplace.
From defined benefits to defined contributions: A major shift for the market
It’s easy to read the news and think the public exchanges created by the Affordable Care Act are the biggest story in health care. But most commercial insurance in the United States still is provided through employers. It’s part of the reason why Advisory Board VP David Willis says the private exchanges are as important—if not more—than the public exchanges for the future of health care.
Zeke Emanuel: Employer-based insurance will die out by 2025
Last year, a PricewaterhouseCoopers survey of more than 700 companies suggested that 45% of employers have adopted or are considering adopting a private exchange before 2018. (Other employer-driven efforts to control employee health costs include offering employer-managed health plans.)
At the summit on Wednesday, Jim Levine—director of compensation and benefits at Church & Dwight—noted that there are about 180 different providers of exchange solutions, meaning there is significant variation in models. But as the exchanges become more popular among employers trying to control costs without scaling back coverage, Levine expects to see consolidation among exchange providers and the dominance of certain types of exchange models.
Choice in the exchanges can create smarter consumers.
At Sears, Carter says private exchanges pushed employees to act like consumers when it came to health care, giving them four key things they didn’t have before:
Price transparency when it comes to unit costs and employer contributions;
Speed, meaning the ability to change plans and carriers annually.
Or, as Carter puts it, it’s the “democratization” of benefits.
John Barkett—the director of health policy affairs for exchange solutions at Towers Watson—notes that defined contributions give employees a strong incentive to carefully consider their coverage every year.
Employees who select plans that are too skinny for their health needs will only make that mistake for one year, he suggests.
But to generate employer savings and help employees make the right choice for their health needs, companies and exchange operators must provide the right decision support, experts say. For instance, Levine notes that exchange solutions cannot reach their full savings potential until point-of-service decision support for consumers are in place.
The takeaway: In an effort to reduce employer health costs, private exchanges can give employees more control over and insight into their health coverage.