The median in-network deductible on employer-sponsored PPO health plans increased 50% from $1,000 to $1,500 in 2016, new research from United Benefit Advisors finds.
This comes as the average health plan costs for employers decreased slightly in 2016 from $9,736 in 2015 to $9,727 in 2016, while the employees’ share increased as they continue to accept lower coverage levels, according to one of the nation’s largest independent surveys of employer-sponsored benefits.
Of the $9,727, employees contributed an average of $3,378 and employers contributed on average $6,350, whereas in 2015, employers paid $6,403 of the $9,736 average overall cost, while employees paid $3,333, the survey found. Further, UBA found that despite those significant deductible increases, nearly half of all employees continue to enroll in PPO plans.
“Overall, employer costs remained consistent because they are passing more and more of their increases on to employees, a trend we expect to see more of in the future,” says UBA CEO Les McPhearson. “Employers simply cannot continue to absorb unsustainable increases in health care costs. Unfortunately, neither can employees.”
The deductible increases are mostly due to two factors, adds Carol Taylor, director of compliance and health plan collaborative at Roanoke, Va.-based D&S Agency, a UBA partner firm. “First, by raising the deductible $500, you avoid a premium increase of roughly 3% to 6%,” she says. “As long as insurance carriers are required to meet the ACA metal levels, we can expect to see plan changes in this same direction.”
There are multiple constraints causing this rise in deductibles, explains Ed Oleksiak, senior vice president and shareholder at Dallas-based brokerage Holmes Murphy.
The amount employees pay for health coverage through payroll is capped as a result of the Affordable Care Act. Out-of-pocket maximums are also capped. As a result, “the deducible is the place to go,” he explains. “That is the variable you can move. You can move the co-pay [slightly], but the deductible is where you get the biggest bang for the buck.”
“That has a pretty constant, especially since the bronze plan was introduced,” Oleksiask adds. “Up until that point, employers were in gold level plan design, but once bronze set in, it set a mark of where the base plan needs to be to keep at an affordable premium. Therefore, you end up with a higher deductible to get to the bronze level.”
Adviser stepping in
It is up to an adviser to help their client determine how to price insurances. Oleksiak shows his clients cost tradeoffs, by showing them the renewal and expected costs next year. “They have a budget to make, so we go through what levers we have to pull,” including the deducible, he explains.
Eventually, a client runs out of levers and a conversation starts with an adviser on looking at the health of a population and wellness programs that can have a measurable impact, he adds.
“You have to know your client, you have to know their culture and their population and look at it from total compensation prospective,” Oleksiak says. “It all about what you are doing to attract and retain employees, you have to keep those high level things in mind and then we say what can we do to deal with this budget, they can’t pass onto their clients, you have to work through that.”
As he runs out of levers to pull, Oleksiak predicts a shift in the near future to narrow network plans in group insurance. “We’ve seen narrow networks on the individual market for a while,” he says. “We are starting to get into conversations to say [to clients], ‘This is about the only level you have left, you have to consider narrow networks,’” he explains.
Monthly premiums and copays
UBA finds that total monthly premiums, combined for all types of plans, remained flat at $509 for a single. However, employers shifted costs to employees in other ways, including median out-of-network deductibles, which jumped from $3,000 to $3,400 this year (a 13.3% increase) and median ER copays increased from $250 to $300 (20%).
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The employees’ share of monthly premiums increased only slightly from $140 in 2015 to $144 (2.6%), and family portions went from $540 in 2015 to $552 in 2016 (2.2%).
UBA also finds that families are again bearing the brunt of the cost of health insurance. For an employee electing single coverage, the employer covers 71% of the monthly premium, and only 54% of a family premium.
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