Health care cost trends over the past year suggest an opportunity for industry producers to deepen their strategic role in employee communication campaigns. New research shows that while the Affordable Care Act seeks to expand access to affordable health insurance coverage, it leaves working Americans increasingly vulnerable to steep increases in out-of-pocket costs, particularly for out-of-network care.
Modest rate increases, along with skyrocketing out-of-pocket costs, were spotted in group health plans in 2015 by United Benefit Advisors’ annual health plan survey. The average annual per-employee cost of a health plan in 2015 was $9,736, with employers covering $6,403 and employees responsible for the balance. It represents a 2.4% increase from 2014.
If employees understand their health plan choices, then it stands to reason that they will make better decisions that can have a positive effect on the bottom line. “Employee education is critical to managing health care costs,” explains Les McPhearson, CEO of UBA. “Brokers and advisers should be helpful in communicating honestly with employees that, despite health care reform, costs have, and will, continue to rise.”
As part of that role, he says they can explain annual deductibles, coverage terms, networks, out-of-pocket liabilities and how to save for uncovered expenses. One area that often gets overlooked is education about prescription cost management. While the survey found that 66.1% of prescription drug plans use co-pays, it’s also worth noting that the number of four-plus tier plans grew 58.1% during the past two years.
“Simply educating employees about what to ask their doctor when determining the best drugs to use can have a major impact on the bottom line,” McPhearson says.
Another key to success involves sharing with employees how their health plans compare with other businesses of the same size, industry and geography so that they can better appreciate having competitive benefits.
“Brokers and advisers are best positioned to provide this level of detailed communication in a highly personalized way across an employer’s plan offerings,” he says.
McPhearson attributes the restrained rate hikes to a combination of factors that include enrollment in plans with less generous coverage and the negotiating power of large groups. A third driving force known as “grandmothering” offers small employers the option to maintain until 2016 a pre-ACA, composite-rated health plan based on the group’s health status.
In response to rising premiums and out-of-pocket costs, however, he sees greater cost-shifting as evidenced by higher deductibles, out-of-pocket maximums, and co-pays for individuals and their families.
UBA noted that these increases reflect skyrocketing cost trends over the past five years. During this time, median deductibles for singles doubled for both in-network and out-of-network coverage. The increases were steeper for families, rising 33% for in-network care and a staggering 75% for out-of-network options.
More careful communication of this activity can lead to better employee engagement and decision-making. A linchpin of any strategic messaging that advisers can impart to their client base will need to emphasis substantial differences in the cost of in-network versus out-of-network treatment. While employees and their families are shouldering more responsibility for their case across the board, it’s predictably not as severe for the former as the latter. There also were mixed results for singles and families.
For example, UBA noted that median in-network deductibles for single employees rose 33% to $2,000 in 2015 from $1,500 in 2014, but they were unchanged at $4,000 for families. The opposite was true for out-of-network care. Median deductibles climbed 16.7% to $7,000 in 2015 from $6,000 in 2014 for families, while they were unchanged at $3,000 for singles.
Increases in median in-network out-of-pocket maximums nearly doubled for singles (14.3%) versus families (8.8%), with those ceilings calculated at $4,000 and $8,700, respectively. However, out-of-network cost increases were twice as large for families ($2,000) vs. singles ($1,000). In addition, out-of-pocket maximums for singles climbed 33% and 50%, respectively, for in-network and out-of-network care, and 45% and 50% for families in those respective categories.
“Out-of-network expenses are not subject to ACA limitations, which means they’ll likely continue to increase significantly as employers continue to shift a greater share of expenses to employees through out-of-pocket cost increases and reductions in family benefits,” McPhearson cautioned when announcing the UBA survey results. “If we only look at slices of the health insurance market, it might appear that costs have remained relatively steady. A closer look at how much of the cost has been shifted to employees, however, reveals a much different story.”
Among the key trends UBA says to watch for in 2016:
- greater use of self-funding for all group sizes;
- a decline in dependent coverage;
- rate stabilization in groups of 51 to 100 employees to avoid community rating, thanks to an ACA amendment;
- and more mail-order pharmaceutical programs driven by convenience over cost savings.
The UBA survey includes validated responses from 18,186 health plans sponsored by 10,804 employers that employ more than two million people and cover more than five million lives. The sample represents a mix of small, midsize and large companies that reflects their actual prevalence nationwide. It includes plan renewals from June 2014 to May 2015 from 129 independent employee benefit advisory firms and their clients.
Shutan is a Los Angeles-based freelance writer.
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