Employee benefit cost sharing rises five percent
Extensive research involving group health premium renewals suggests that as employers run out of cost-shifting strategies they are expanding prescription drug tiers to better manage pharmacy benefits.
After years of rising co-pays and then deductible increases, little wiggle room on those cost levers this year “led employers to shift rising premiums to employees and take aim at rising prescription drug costs,” says Peter Weber, president of United Benefit Advisors, which released its 2017 UBA Health Plan Survey.
Average employee premiums for single coverage edged up to $532 in 2017 from $509 in 2016 and family coverage rose to $1,272 from $1,236. In addition, average annual total costs per employee increased to $9,935 from $9,727.
What’s telling, though, is that the employee share of total costs this year rose 5% to $3,550 from $3,378 versus less than 1% for the employer’s share to $6,401 from $6,350. Another noteworthy development is that this year’s premium increases, while not very significant, represent a departure from years of fairly steady rates. UBA found that renewals this year rose an average of 6.6% compared with a five-year average increase of 5.6%.
The emergence of six-tier drug plans indicates that employers are taking a more aggressive approach to managing high-cost scripts, Weber says. And with 60% of plans with wellness benefits offering telephonic coaching for high-risk employees who may be taking expensive medications, he adds that “it’s no surprise employers want to carefully assist employees in navigating their benefits, and understanding options like generic drugs, step therapy programs and the like.”
The fourth, fifth, and sixth tiers pay for biotech drugs, which are the most expensive. By segmenting these drugs into other categories with significantly higher copays, employers are able to pass along more of the cost of these drugs to employees.
The survey noted that prescription drug plans with four or more tiers exceeded those with one to three tiers for a second straight year. In fact, the former far surpassed the latter (72.6% vs. 27.4%), while the number of six-tier plans surged to 32% from just 2% of plans within the past year. “While employers chose to hold contributions, copays and in-network benefits steady, they dramatically shifted prescription drug costs to employees,” according to Weber.
The annual poll of 20,099 health plans and 11,221 employers with more than 2.5 million employees and 5 million total covered lives also noted significant regional disparities. Two states, for example, saw record monthly premium increases within the past year: 24% in Connecticut up to $655 from $530 and 14% in New York up to $712 from $624. In contrast, Arizona and Washington experienced 2% and 10% decreases, respectively.
This common occurrence shows why “local benchmarking is just as critical as comparing your plan to national data,” says Danielle Capilla, SVP of compliance and operations for UBA. For example, HMOs are predominant in California, while Northeast and Central U.S. employers are reluctant to move away from costlier preferred provider organizations plans.
“If they are not grandfathered or grand-mothered,” she says, “they have little protection from rising costs, especially since 53% of employers are generally trying to maintain gold and platinum plans, which reflect pre-ACA benefit levels. As a result, there are few relief valves for combating rising costs.”