Employers likely to Change Plan Design and Benefits for 2011

A new Mercer survey shows that many employers will need to change their plan design and/or contributions for 2011 and beyond to an extent that will cause the plans to forfeit "grandfathered" status. Given the need to impose cost savings - or else absorb an unpalatable level of health benefit cost increases - only half (53%) of surveyed employers indicated they would retain grandfathered status for their plans.

Healthcare reform included a proviso that plans would not have to implement many of the cost-sharing and coverage mandates - provided the plans only imposed minimal cost-sharing requirements on members. For example, a plan cannot increase deductibles or out-of-pocket (OOP) limits by more than 15 percentage points beyond the increase in the medical inflation, nor can they raise copays by more than that amount, or $5, whichever is greater. Also, plans cannot increase employee coinsurance percentages. However, survey results demonstrated that, as a Mercer partner commented, "The rules for maintaining grandfathered status were tougher than many employers expected. As they start to get a clearer picture of projected cost for 2011, many are finding they need more flexibility to get their cost increases down to a level they can handle." Maintaining grandfathered status becomes more challenging over time so we expect this trend will grow.

What does this mean for the average American with employer-sponsored coverage including self funded plans? Well just under half of the plans will have their coverage, copays and contribution stay exactly the same for 2011 which is of itself remarkable. But for the rest, the trend will continue for higher premium and out of pocket costs where such increases are permitted under health reform. Health reform has brought more transparency and focus on these issues -- but the cost issue especially for working families remains.