With open enrollment season—the time when employers let their employees select benefits for the year ahead—approaching, here are five open enrollment trends that may affect how employers offer benefits to their employees in 2016.
1. Moderate Premium Increases
Single and family premiums under employer-sponsored health plans rose only four percent in 2015, with an average increase of five percent over the past 10 years, according to the Kaiser Family Foundation.
The trend is expected to continue next year. PricewaterhouseCoopers predicts employers will only spend 6.5 percent more on worker medical costs in 2016, less than the 6.8 percent increase projected for 2015. The net growth rate next year is expected to be even lower—4.5 percent—as employers use higher deductibles and co-pays to shift more costs to employees.
2. Shifting More Costs to Employees
Deductibles are up 67 percent since 2010, while single premiums are only up 24 percent and general inflation has only been nine percent. The number of employers offering high-deductible health plans has quadrupled since 2009, according to PricewaterhouseCoopers.
"With deductibles rising so much faster than premiums and wages, it's no surprise that consumers have not felt the slowdown in health spending," Drew Altman, president and CEO of the Kaiser Family Foundation, said in a news release.
The higher deductibles go along with the strategy of "health care consumerism," in which employees are made more aware of what they are spending on health care (and hopefully help rein in costs in the process). Health consumerism also includes health savings accounts, health reimbursement arrangements, and more tools to help employees compare both the cost and quality of various health providers.
"More employers are making available transparency tools — and more user-friendly tools — to help employees make educated decisions about where and from whom they receive health care," Shannon Demaree, director of strategic consulting initiatives at Lockton Benefit Group in Kansas City, Mo., tells the Society for Human Resource Management.
"Virtual care" is expected to ramp up in coming years, too, as employers and employees alike seek more affordable health care options.
3. ACA Requirements Get Stricter
2015 was the first year that applicable large employers with at least 100 full-time (including full-time equivalent) employees had to meet ACA requirements for offering health insurance—or potentially pay a penalty to the IRS. Next year, the net widens to include employers with at least 50 full-time (including full-time equivalent) employees. An employer could end up paying tens of thousands of dollars in penalties if, for example, it does not offer adequate and affordable health insurance but at least one of its workers receives a premium tax credit for coverage obtained through a state or federal marketplace. A worker paying more than 9.66 percent of their household income on the company health plan could also trigger a penalty. The Kaiser Family Foundation has a helpful chart breaking down the Employer Shared Responsibility provisions within the ACA.
A meaningful portion of employers may also need to change health plans in coming years to avoid the ACA's high-cost plan tax, or "Cadillac plan" tax, that takes effect in 2018 and is meant to discourage employers from offering health plans that are overly generous. Expect even more health care expenses to become out-of-pocket for workers.
"The Cadillac tax is pushing more employers to enact higher cost sharing," Mark Pauly, professor of health care management at the University of Pennsylvania's Wharton School, tells PwC.
4. Promoting Wellness
Among open enrollment trends, employers are increasingly offering more carrots and sticks for employees to better manage their own health. The true health benefits may not become apparent until well after a worker has left their present job, but employers may still realize that workers who feel better are more productive and less likely to call in sick.
The trend, though, is still more common among larger employers, according to Kaiser. Half of large employers (those with 200 or more workers) offer health risk assessments to employees, but only 18 percent of small employers do. Half of large firms, but only 13 percent of small firms, offer biometric screening. Among large employers, 81 percent have programs to help employees quit smoking, lose weight, or make other positive lifestyle changes; only 49 percent of small employers have similar programs.
5. More Personalized Benefits
Another major trend for 2016 involves employers offering benefits that target the financial needs of specific segments of their workforce. Think student-loan assistance, expanded parental leave, or retirement preparation planning.
"Employers are seeing multiple generations, with multiple dynamics based on things like level of debt and life events," Betsy Dill, a senior partner and global retirement strategist at Mercer, tells SHRM.