Choice and responsibility starting to bend healthcare cost curve

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Never underestimate the power of combining freedom of choice with personal responsibility when helping clients benchmark and design the best possible health benefits package, suggests research from a leading employee benefit insurance brokerage and consulting firm. These initiatives were credited with helping to tame rising costs.

“It is important to begin to have members pay part of their healthcare plan, whether it’s a larger deductible or you’re driving them to consumer plans,” said Suzanne McGarey, managing principal of employee benefits for EPIC Insurance Brokers & Consultants during a recent webinar to discuss the firm’s 2017 Benefit Cost Market Trend survey.

EPIC surveyed 213 employers covering more than 46,000 employees worldwide, 70% of whom work for companies with fewer than 1,000 people.

McGarey cautioned that employers with extremely high-cost benefit plans requiring little or no employee contribution “are not necessarily getting the same bang for their buck as those who have begun to modify their health plans and have employees with skin in the game.”

Apart from holding employees more accountable for the cost of coverage, she cited the importance of choice to meet different individual or family needs. “Their ability to choose one plan or another gives them a sense of relief,” she added.

The employers studied appear to be making progress by seeing some slack in the growth of healthcare costs, McGarey said. She rounded it down to about 4% growth for all employers vs. just 3% among employers with fewer than 1,000 employees within the past year, lauding middle-market companies relative to their larger counterparts. The average medical plan cost was $13,257 per employee per year (PEPY), according to the survey.

Of 452 medical plans examined, half were PPOs, nearly 32% were consumer-driven health plans and about 17% HMOs. PPOs are co-pay driven and raising cost-sharing, she added, which at $13,837 PEPY made it more costly than CDHPs ($12,292) and HMOs ($11,518).

Cost analysis
In terms of weighted average medical plan costs, there were few differences among employees when factoring in employer size and plan type. McGarey isn’t sure that a $300 employee cost differential is enough to drive participation in a lower cost employee health plan, noting how the focus needs to be more on lower out-of-pocket maximums vs. higher annual deductibles.

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Deductibles for all employers averaged $2,000 for individuals and $4,000 for families that sought in-network care, doubling for out-of-network care. Out-of-pocket maximums for all employers averaged $4,000 and $7,000 for individual and families who sought in-network care, soaring to $9,000 and $18,000, respectively, for out-of-network care.

CDHPs are becoming more popular, though McGarey said they haven’t yet captured the heart of cost-conscious consumers — even in the face of financial incentives to choose these plans over PPOs. More than half of all employers are offering CDHPs and it’s expected to grow, she added. CDHP enrollment is 41% among those who work for companies with fewer than 1,000 employees. However, she believes driving CDHP enrollment isn’t just about cost; it’s also about plan design and communication.

One key market trend the survey identified is that healthcare is going digital, with more than 97,000 mobile apps for health and fitness, McGarey said. Telehealth sessions have become very appealing because they average just 15 minutes compared with about two hours for in-person doctor office visits, she added.

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