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Small Business Employee Benefits and HR Blog

Employers Shifting Responsibility of Health Benefits to Employees

The employer's role in health benefits is shifting. Traditionally, employers have owned the responsibility of health insurance for employees. This is ending. Employers are now starting to transfer the control and responsibility to their employees. Why? Because data has shown that when employees are in charge of their own health care they:

Control health benefits

  • Understand their plan and coverage better

  • Use their benefits more efficiently

  • Lead a healthier lifestyle

For example, the Aon Hewitt 2013 Health Care Survey found that U.S. firms are taking assertive steps to inform employees about their health care risks, inspire them to change behavior, and take a more active role in their own health care planning. Employers have healthy outcomes and healthy living improvements on top of mind because doing so helps them achieve their HR and budget goals.

Increase in Consumer-Centric Benefits 

The Aon Hewitt 2013 report shows that, partly in response to the Affordable Care Act (ACA), benefits are dramatically changing from primarily group-oriented health benefits to individual consumer approaches. The use of consumer driven health plans (CDHPs) - such as defined contribution health plans - have increased in popularity over the past few years, with 56% of employers surveyed offering CDHPs today, and 30% planning to offer them in the future.

The report also found that over the next three years, 28% of employers expect to move to a defined contribution approach. Many of the ACA provisions strongly favor the individual health insurance market, making defined contribution health plans the ideal health insurance solution for most US employers. The "purest" form is a defined contribution approach where employees use a healthcare allowance to purchase insurance, selecting an individual health insurance plan and making payments out of their own finances. This gives them control and choice over their health care, which in turn increases their health consciousness.

Complying with ACA, and Reducing Unnecessary Expenses

According to the report, 51% of employers say that complying with the new regulations set forth by the ACA is a top priority. That being said, employer health care costs have been consistently on the rise, and the additional fees and indirect costs of the ACA may increase costs for employers by another one or two percentage points in the next two years. This is even further incentive for employers to actively pursue ways to reduce health expenses by making changes to vendors, plan design, or contribution strategies.

To help control the cost, 69% of employers said that motivating employees to change health behaviors will be a significant focus in the next three to five years. This ties into a strategy of shifting from traditional plan management to effective employee participant engagement. No more one size fits all plans.

Trending Health Benefits Strategies

According to the report, some of the major strategies employers are using to motivate healthy living include promoting greater health awareness, heightened consumerism, and increased focus on higher-cost claimants.

Defined contribution health plans are becoming popular because they are a solution to these concerns -- they help employers save on costs while providing the same or better benefits as group health insurance. However, one hurdle preventing some businesses to switch to a defined contribution health plan were key employees with pre-existing conditions who wouldn’t be able to find affordable health insurance in the individual market. In 2014 this hurdle goes away as part of the ACA. With guaranteed-issue policies starting in 2014 and massive tax subsides through the health insurance marketplaces, defined contribution health plans are emerging as a smart solution to current market shifts.

The report surveyed a total of 837 individuals in December 2012 and January 2013. They were asked to answer questions about their U.S. health care plan(s). They represented companies both large and small. To read the full report and more details on methodolgy, see: Aon Hewitt 2013 Health Care Survey.

Defined Contribution and Health Care Reform Kit