Highlight on Arizona: In Seeking Cost-Savings, Employers Largely Choosing High-Deductible, Low-Premium Employee Plans

Approximately two-thirds of large employers in Arizona offered their employees “consumer-directed plans” requiring a deductible of at least $1,500 paid before coverage began, according to Mercer’s National Survey of Employer Sponsored Health Plans 2014. Such plans often were combined with health savings accounts to which employees could contribute pre-tax portions of their salaries.

Despite the large number of employers offering consumer-directed, high-deductible health plans, however, only about 26 percent of Arizonians chose to enroll in them.

Employers Choosing Cost-Saving Options

Employers in Arizona are also increasingly choosing plans limiting the doctors and hospitals employees may choose to utilize for lower in-network rates. Denise Jewell, a mercer principal based in Phoenix, Arizona, told AZ Central that employers may limit physician and hospital networks based on quality as well as cost.

We are increasingly talking with our clients about this strategy,” she said. “The cost savings can be significant.” Employees can share in their employers’ savings, as well, since high-deductible plans that are cheaper for employers also carry lower premiums–about $75 rather than $106 per month for the average plan.

Employers Embracing Private Exchanges

The survey also noted that Arizona employers have largely not chosen to eliminate coverage for their employees in favor of the Health Insurance Exchanges. “We have seen a decrease in employers that have indicated any likelihood of terminating a plan,” Jewell told AZ Central. “The reality is the [Patient Protection and Affordable Care Act (P.L. 111-148)] made it clear that employers have a role in providing benefits to consumers.”

Rather than eliminating coverage, the survey found that employers have actually shifted to the private exchanges, with 28 percent of employers nationwide responding that they are likely to do so in the next five years. Mercer President and CEO Julio A. Portalatin noted, “The strong interest [employers are] showing in private exchanges suggests that this new benefit delivery system is the innovation they have been waiting for.”

ACA Requirements for Employers

Under the ACA, employers with 100 or more full-time equivalent employees (FTEs), i.e. who work 30 or more hours per week, are required to provide affordable health insurance coverage with minimum value to employees and their dependents up to age 26. Employers who do not comply are subject to tax penalties.