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Large companies remain confident about offering health insurance

Despite concerns that the new federal health care reform package will lead some employers to drop group plans and force workers into the new health insurance exchanges, most large companies remain confident about their ability to offer health benefits over the next several years.

Seventy-one percent are "very confident" about offering health care benefits to active versus retired employees in the next five years, according to the 2011 Towers Watson/National Business Group on Health Employer Survey.

doctor-confidentBut confidence drops sharply to just 38 percent of employers when asked if their organizations will offer health care benefits in 10 years. The 10-year confidence figure -- the lowest since Towers Watson began tracking the data -- is down from 57 percent in 2009, 62 percent in 2008 and 73 percent in 2007.

Fear of the unknown

The increasing uncertainty over time is a reflection of unknowns, rather than an indication that companies are moving toward dropping health care benefits, says Julie Stone, a Towers Watson consultant based in the firm's New Jersey office.

"There's a lot of uncertainty about what the health care delivery system will look like," Stone says. "Employers are not thinking about exiting the health insurance market at this point."

The Cadillac tax

But companies are taking a hard look at costs. Employers expect health care benefit costs for active employees to rise 7 percent this year, up from a 6 percent increase in 2010, according to Towers Watson. Cost increases are nothing new, but a continuing rise is troubling, and worries of the so-called "Cadillac tax" in 2018 are heightening employers' sense of urgency to contain costs. The Cadillac tax is an excise tax employers will pay on high-cost health plans. It’s intended to keep a lid on health care inflation by encouraging employers and individuals to shop carefully.

The Towers Watson survey found that if current average annual cost increases continue, 60 percent of company plans will reach the taxable level by 2018. Employers that take action now to control costs, such as offering lower-cost, high-deductible plans with health savings accounts or health reimbursement arrangements, will have a strategic advantage. Many employers already are moving in that direction. In 2002, just 2 percent of all employers offered such plans, compared to 53 percent in 2011, according to Towers Watson.

Savings-based plans

The average cost of a high-deductible health plan with a health-savings account was $6,759 per employee in 2010, almost 25 percent lower than the cost of a preferred provider organization plan, according to Mercer's 2010 National Survey of Employer-Sponsored Health Plans.

Mercer projects continued movement away from PPO and health maintenance organization (HMO) plans to high-deductible, savings account-based health plans.

Another trend employers are embracing is rewarding employees for healthy habits. Health reform allows employers to use larger incentives to encourage workers to manage their health. The healthier you are, the fewer costly services you require. A third of employers plan to reward employees for measurable improvements, such as losing excess weight or lowering cholesterol, according to the Towers Watson survey.

More from Barbara Marquand here

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