Finance is ‘leaning in’ to manage healthcare costs, WTW exec says
With employer costs for workers’ healthcare benefits expected to rise 11.1% in 2027, CFOs are taking notice, according to WTW’s Tim Stawicki.
“Finance is leaning in more and helping to manage healthcare costs,” Stawicki, senior managing director of health and benefits at the global insurance broker and consulting firm, said in an interview, noting that it hasn’t historically been a primary focus of finance chiefs.
“If HR and finance can partner together, we can often come up with the best options,” he said.
The higher costs are not easy to rein in. With employees and their families involved, it’s not just a cost exercise, he said. Companies are looking for ways to redesign a leaner healthcare plan for 2027 or 2028 while balancing employee needs with company costs, as well as the need to compete for and retain top employees.
CFO Dive recently spoke to Stawicki about how companies are navigating the challenges, their legal obligations to their workers and what CFOs need to know before the window for making changes to 2027 or 2028 healthcare plans closes. The following Q&A was edited for clarity.
CFO Dive: Where are we now in the calendar year for redesigning healthcare plans?
Tim Stawicki: It depends upon the size of the employer. For larger employers it’s probably too late for 2027 plans. They’ve had conversations, figured out their pricing and strategy and are currently implementing that through communication materials through open enrollment. For the midmarket, they’re probably in the midst of these strategies right now. Now would be the time they need to think about what the final changes are.
CFO Dive: What healthcare benefits are employers required to provide?
Tim Stawicki: The Affordable Care Act passed in 2010 did institute a requirement for businesses with 50 or more employees…to provide a certain level of coverage to most of their staff or face financial penalties. The reality is many employers were offering comprehensive health insurance long before that mandate came into place because they needed to do it to be competitive.
CFO Dive: What’s the minimum amount of coverage that companies can provide?
Tim Stawicki: It’s called a minimum value plan. It essentially means it has to have a 60% actuarial value. Of the total health care dollar [cost], 60% needs to be covered by a plan, so the remaining 40% could be in the form of deductibles, copay, co-insurance that the members are paying out of their own pockets. Most employers offer plans that are closer to 80% or 85% actuarial value, so a 60% plan would feel pretty lean. You’d probably have a $5,000 deductible or something like that.
CFO Dive: What is the penalty for not providing at least the minimum health insurance?
Tim Stawicki: It differs. It indexes around $3,500 per employee per year that an employer would have to pay. If healthcare costs are anywhere between $15,000 and $20,000 per employee that [penalty] is certainly less than that, but it’s a fee or a penalty that you’re paying that would have no intrinsic value. The healthcare cost is something that supports the health and well-being of the employee population.
CFO Dive: This year where do you expect the majority to pull back on spending by redesigning their plans?
Tim Stawicki: What I see many employers doing is they’re looking for ways that they can make changes that won’t have as much impact on employees. Examples of which would be evaluating their vendor partners, looking into fraud waste and abuse, and paying claims most effectively; They’re looking into alternative plan designs that help steer members to lower cost and or higher quality providers.
CFO Dive: How does restricting eligibility, another option for cutting costs, work?
Tim Stawicki: If I may oversimplify how an employer is going to spend on health insurance, one is going to be how rich are the benefits you offer, the second is how do you split the costs, but the third would be participation. If I have fewer people participating in my medical insurance my total spend will be less. Restricting eligibility is probably one of the lesser options on an uptick.
For a long time, we’ve seen spousal surcharges. If you are a working spouse and have coverage elsewhere [the company] is going to charge you extra to encourage you to take your own employer’s benefits. You can also look at things like waiting periods. Some employers provide coverage immediately, others have a waiting period of up to 90 days. For some industries that have high turnover that might have a meaningful financial impact if employees don’t get coverage on day one.
CFO Dive: What should CFOs know about plan redesigns?
Tim Stawicki: It’s helpful to know where there is and isn’t control. Not every part of healthcare spend is something that any given employer can manage. Many employers will pick an insurance company to help administer their benefits, that insurance company has a network of providers where they negotiate the rates and reimbursement and any individual employer largely has no influence over what those contracts looks like between insurance carrier and provider. Where employers do have a say is which vendors they do work with. And they have some control on trying to influence the utilization of their network.
