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Wells Fargo Insurance Study: Next Phase of ACA to Bring More Changes and Challenges to Employee Benefit Plans

02/16/2016
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Employers remain focused on controlling costs, avoiding “Cadillac” tax

Despite already modifying their benefit plans last year, employers expect their healthcare costs to rise again in 2016, which will require additional changes, according to the Employee Benefits Trend Study released today by Wells Fargo Insurance, part of Wells Fargo & Co (NYSE: WFC). Fifty eight percent of employers surveyed expect their medical plan costs to exceed the thresholds for the Affordable Care Act (ACA) excise tax, or “Cadillac” tax, which was originally to take effect in 2018, but has been delayed until 2020. Additionally, 70 percent of employers expect their budgets for benefit plans to increase, as human capital and health and productivity remain key issues for businesses to manage.

The Employee Benefits Trend Study surveyed more than 650 middle-market companies and large corporations to better understand how organizations are responding to health care reform requirements, while also developing a competitive benefits strategy.

“As they balance business goals with controlling cost, employers are also exploring additional changes to their plans to avoid the Cadillac Tax,” said Dan Gowen, national practice leader with Wells Fargo Insurance’s Employee Benefits National Practice. “The rapidly changing market and delay in the tax implementation provides another opportunity for employers to be creative as they continue to refine their benefit plans.”

Half of the employers in the study said they will continue to make changes to their plans either this year or in 2017 by adding a high deductible plan option (52 percent), increasing the employee contribution percentage (56 percent), or increasing co-insurance features (55 percent).

Employers are also making strategic changes to plans that address not only the physical well-being of their employees, but also chronic condition management and mental, financial, and social well-being. The survey found that as an employee engagement strategy, employers are taking a multi-pronged approach by adding incentives or penalties and increasing health and wellness offerings:

  • Voluntary benefit solutions – As more employers offer high deductible health plans, the C-suite is also aware of the financial exposure that employees face with these types of plans. As a result, they are looking to mitigate those costs by offering voluntary benefits solutions (e.g. critical illness and accident insurance).
  • Wellness offerings – Employers of all sizes are seeking ways to encourage a healthier and more productive workforce. Fifty one percent of companies expect to increase wellness offerings, and 37 percent will add wellness incentives or penalties to their programs in 2016.
  • Focused on return on investment (ROI) – 91 percent of C-suite respondents said improving the health of employees is important as it correlates with lower medical costs, reduced absenteeism, and increased productivity.

Aside from becoming compliant with the ACA and lowering costs, the study also found that C-suite executives are making changes to their plans because of an increased focused on attracting and retaining talent, with 62 percent saying it is a top concern, up from 45 percent last year.

“If the economy continues to improve, the demand for talent will grow, and having a benefits program that fits the company’s culture is crucial to securing key talent,” said Gowen. “As employers focus on attracting and retaining talent, they can partner with their insurance broker and employee benefits advisor to explore making changes that best support their business goals and strategies.”

Wells Fargo’s Employee Benefits National Practice helps customers with financial underwriting and insurance, health and productivity risk management, benefits communication and administration, and compliance with health care reform.

The practice has also released its 2016 Employee Benefits Market Outlook, which provides additional insights and trends on the market from the practice leaders at Wells Fargo Insurance.

About Wells Fargo Insurance

Named Best Insurance Broker in the U.S. by Global Finance Magazine1, Wells Fargo Insurance provides solutions for a wide range of customers, including retail consumers, high net worth individuals, small businesses, as well as middle market and large corporate customers. Wells Fargo Insurance writes or places $11 billion of risk premiums annually in property, casualty, benefits, international and personal lines.

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.8 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through 8,700 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 30 on Fortune’s 2015 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Wells Fargo perspectives are also available at Wells Fargo Blogs and Wells Fargo Stories.

1 2015 Ranking includes Wells Fargo Insurance Services USA, Inc., Wells Fargo Insurance, Inc., and Rural Community Insurance Company

Wells Fargo & Company
Katie Ellis, 415-222-3767
Kathryn.d.ellis@wellsfargo.com
@KatieEllisWF

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