The Only Certainty is Uncertainty: Managing the Impact of Health Care Reform on HRO

A now perennial concern for U.S. employers is the cost of providing health care to employees. It is number one on the list of the “2011 Top Five Total Rewards Priorities,” a study sponsored jointly by Deloitte and the International Society of Certified Employee Benefit Specialists (ISCEBS).  Here are the top five for this year:

1. The cost of providing healthcare benefits to active employees
2. The willingness of employees to pay for an increasing portion of benefit plan coverage and to manage their own reward budget
3. The ability of reward programs to attract, motivate and retain talented employees
4. The ability to adjust to and comply with current and future provisions of Health Reform legislation
5. Clear alignment of Total Rewards strategy with business strategy and brand.

Employer uncertainty on the requirements and cost of compliance with U.S. health care reform continues to the point where “the only certainty is uncertainty,” according to the study. In the meantime, 65% of 242 respondents said they had no plans to change employee-sponsored coverage. Only 9% of employers indicated that they plan to drop employer-sponsored coverage and pay the penalties with the expectation of further legislation and required changes. Lastly, about 20% of employers said they would consider converting to a defined contribution plan for health care and encourage employees to join an exchange.

Eight-five percent of employers are highly certain that an impact of health care reform will be higher costs for both the employer and employees. Seventeen percent are also concerned they will fall in competitiveness with peers in other countries.

If most employers are planning to change health care benefits at this time, what are they doing? They are closely monitoring the situation with 73% reporting they will re-evaluate benefits due to health care reform in the next 12 months.

Uncertainty is also an opportunity. Besides the obvious opportunity for continued benefits consulting, there are other opportunities for HRO. For example, total rewards statements are more than nice fluff. With effective communications, employers can help employees appreciate the full value of their wages and benefits, support the case for understanding cost shifts to employees, and even help with the attraction and retention of talent. Also, dependent audits have been a good foot-in-the door technique the last couple of years, ensuring value benefits go to only covered employees. Finally, absence management is another growing HRO service line with great potential to assist employees in difficult times and impact the bottom line when well-managed.

In core benefits administration, highlighting expertise in monitoring, understanding, and implementing regulatory benefits changes shows clients they will have a capable partner in their corner, no matter the changes ahead. Being the knowledgeable resource of choice in the midst of health care reform uncertainty and rising costs can be a leverageable factor in attracting new clients and deepening the relationship with current clients.

Is your HRO provider the rock you can rely on in times of uncertainty?

Linda Merritt, Research Analyst, HRO, NelsonHall

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