The Impact of Health Care Reform

THE IMPACT OF HEALTH CARE REFORMFindings from the 2014 Aflac WorkForces Report

HCR14027 03/25/2014

• The 2014 Aflac WorkForces Report is the fourth annual Aflac employee benefits study examining benefits trends and attitudes.

• Fielded in January 2014 by Research Now, a global online-sampling and online data-collection company.

• Responses from 5,209 American employees, 1,856 business decision-makers and 314 benefits brokers.

• Findings show the effect health care reform is having in the workplace and the growing importance of voluntary benefits to workers.

• For details on the survey methodology, visit aflac.com/aboutAWR.

About the 2014 Aflac WorkForces Report

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Controlling cost was a top business objectivefor 49% of companies

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Companies implemented the following measures in 2013:

•22% eliminated or cut back employee benefits options in 2013.

•28% increased employees’ copayments.

•28% increased employees’ share of the premium.

•9% eliminated contributions for family coverage.

The continuing move to consumer-driven health care

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A consumer-driven health care model gives consumers the primary decision-making role regarding the health care they receive. Yet,

•71% of workers have not heard of the phrase consumer-driven health care.

o Of those who have heard the phrase,only 19% say they understand it extremelyor very well.

•19% of employers offered a High Deductible Health Plans (HDHPs) as an option in 2013.

•48% of employers offered Flexible Spending Accounts in 2013.

Employees are confused about heath care reform

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• 73% of workers agree that health care reform is too complicated to understand.

• 71% of workers agree that their personal health insurance situation will become more confusing.

• Though the online exchange or marketplace for individual coverage opened in 2014, only 10% of workers say they are very or extremely knowledgeable about federal and state health care exchanges.

• Only 40% understand health care reform extremely or very well.

• Nearly 2 in 10 employers say they do not understand health care reform at all or very well.

• Yet, 68% of workers at least somewhat believe their employer will educate them about changes to their health care coverage due to health care reform.

• 45% of employers will rely on brokers or insurance companies to suggest changes to their benefits packages due to the changing health care environment.

Employers are confused about heath care reform too

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Workers’ Top 4 HCR Concerns

Concern No. 1: They don’t know enough to effectively manage their health care options

• 51% of workers say they do not prefer to be in control of their health care expenses/options because they don’t have the time or knowledge to effectively manage it.

• Workers have limited knowledge of key consumer-driven health plan options.Those who say they are extremely or very knowledgeable about:

o Flexible Spending Accounts – 40%

o Health Savings Accounts – 31%

o High Deductible Health Plans – 26%

o Health Reimbursement Accounts – 21%

• 47% of workers have not begun to prepare themselves for possible changes to the health care system.

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Concern No. 2: Unsure how they will be affected

Since many do not understand health care reform, they are left wondering how health care reform will impact them.

•While 26% of workers strongly or completely agree they will have better insurance because they will have greater control:

o Only 14% of workers strongly or completely agree that the quality of their health care will increase as a result of health care reform.

Many indicate they believe health care reform will affect the cost of theirhealth care coverage.

•The majority (86%) at least somewhat agree the medical costs they are responsible for will increase.

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Concern No. 3: They are not financially prepared

The reality is that many companies already shift a significant share of health care premiums to their workers, and yet:

•42% say they are not at all or not very prepared to pay for out-of-pocket expenses associated with a serious illness or injury.

•49% of employees have $1,000 or less to pay for out-of-pocket expenses associated with an unexpected serious illness or accident.

•27% of employees have less than $500 available to pay for out-of-pocket expenses associated with an unexpected serious illness or accident.

•39% of workers would have to borrow from their 401(K) and/or from friends and family to pay for out-of-pocket expenses associated with an unexpected serious illness or accident.

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Concern No. 4: They underestimate out-of-pocket medical costs, resulting in financial stress

Very few American workers understand the impact of medical expenses on their overall financial health. In fact, many workers are facing financial crisis:

•42% say they are not at all or not very prepared to pay for out-of-pocket expenses associated with a serious illness or injury.

•69% of workers at least somewhat agree that they regularly underestimate the total cost of an injury or illness, including medical, household and OOP expenses.

•At least 1 in 10 (13%) workers are currently dealing with high medical bills, roughly 20 million workers.

•Nearly one-quarter (24%) of the workforce has been contacted by a collection agency due to medical costs and/or had their credit score negatively impacted.

•10% of workers have missed bill payments due to high medical costs, totaling approximately 15 million workers.

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At a Critical Crossroads

Benefits impact employee attitudes

The 2014 Aflac WorkForces Report shows that employee perceptions of the degree to which their employers care about them weighs heavily on their loyalty or lack thereof.

•When asked how influential an overall benefits package is in the decision to leave a current employer, 78% say at least somewhat influential.

o 57% of workers are at least somewhat likely to take a job with lower pay but better benefits options.

•When asked what their current employer could do to keep them, 41% said “improve my benefits package.”

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ONLY 14% OF WORKERS SAY THEY ARE EXTREMELY SATISFIED WITH THEIR CURRENT BENEFITS PACKAGE.

Employees rate benefits higher than employers do

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• “Personal financial issues” was named as the top nonwork related issue that distracts most employees during work.

• Voluntary insurance policies help employees cope with living expenses andout-of-pocket costs associated with accidents or illnesses – costs major medical insurance was never intended to cover.

• Voluntary insurance policies are designed to pay regardless of major medical insurance, including policies that will be in place through public or private marketplaces and exchanges.

• Voluntary benefits options help offer workers an essential safety net.

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Change presents an opportunity

Health Care Reform does not eliminate the need for voluntary insurance; it shines a spotlight on employees’ increasing need for

voluntary benefits!

WORKERS MAY WELL BE THE ONES RESPONSIBLE FOR THEIR HEALTH CARE DECISIONS, BUT THE WRONG CHOICES CAN

GREATLY AFFECT THEIR PERFORMANCE AND STATE OF MIND IN THE WORKPLACE.

Workers want benefits – and are willing to pay for them

• 88% of workers at least somewhat agree that voluntary benefits options are a part of a comprehensive benefits program.

• 52% of those without access to voluntary benefits options say they would at least be somewhat likely to purchase voluntary benefits options if their employer offered them.

• 63% see a growing need for voluntary benefits options.

• When asked why the need for voluntary benefits options is growing today, workers say:

o Rising medical costs: 76%

o Rising medical coverage costs: 66%

o Increasing deductible and copays: 61%

o Because employer reduced benefits and/or coverage: 37%

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Thank you

This material is intended to provide general information about an evolving topic and does not constitute legal, tax or accounting advice regarding any

specific situation. Aflac cannot anticipate all the facts that a particular employer or individual will have to consider in their benefits decision-making

process. We strongly encourage readers to discuss their HCR situations with their advisors to determine the actions they need to take or to visit

healthcare.gov (which may also be contacted at 1-800-318-2596) for additional information.