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Higher deductibles, out-of-pocket maxiumums and co-insurance in employer-provided plans
Employers in the U.S. are continuing to shift health coverage expenses to their workers in response to rising plan costs (growing at a slower rate but still handily outpacing overall inflation) and in an effort to avoid the high-value-plan “Cadillac tax” required by the Affordable Care Act (ACA) in 2018.
These shifted costs are represented by an increase in high-deductible plans, a greater number of plans with co-insurance charges, higher out-of-pocket maximums and increases in emergency room (ER) co-pays, according to findings from the 2014
Medical Plan Trends Report from benefits management firm HighRoads and consultancy CEB.
The trend is expected to speed forward as 2018 approaches, when the ACA will impose on employers a 40 percent excise tax on total health plan premium costs that exceed $10,200 for individual coverage and $27,500 for a family, indexed for inflation.
Among the findings noted in the HighRoads report, which looked at health plan designs across all plan types:
Growth in high deductibles. In 2014, employer plans with high deductibles (at least $1,250 for individuals or $2,500 for families) grew to 25 percent, up from 23 percent in 2013.
Higher out-of-pocket maximums. Two-thirds of employer health plans (66 percent) had individual, in-network out-of-pocket maximums of $2,500 or more in 2014, up from 58 percent of plans in 2013 and 49 percent in 2012.
Shift toward co-insurance. Forty-two percent of employer plans charged co-insurance (an out-of-pocket percentage of the provider's fee) for office visits, up from 35 percent in 2013. This was accompanied by a drop in flat-dollar co-pays, from 65 percent of plans in 2013 to 58 percent of plans in 2014.
Increase in ER co-pays. Per-visitemergency room co-pays have increased by roughly $3 per year since 2009, with a 2014 average of $113 per visit.
According to the report, many employers are turning to co-insurance and high deductibles "to expose plan participants to the true costs of health care and encourage better informed, more cost-effective decision making." However, the analysis noted that "as co-insurance rates increase, plan participants become more likely to delay necessary care due to uncertainty about the actual costs, in dollars, that the co-insurance rate will translate into." Among the observations offered to employers:
Making sure plan participants have cost information can reduce the likelihood of their delaying or rationing care by as much as 50 percent.
An out-of-pocket maximum for individual coverage above $2,000 leads to a precipitous drop in employees' perceived value of their medical benefits. Health plan communications should emphasize strategies and decisions employees can use to manage their health care costs and should stress how uncommon it is for the average employee to reach the out-of-pocket maximum.
Plan designs that incorporate a 1-3-5 ratio for primary care physician relative to urgent care, relative to emergency room co-pays, prompt thoughtful decision-making and discourage unnecessary ER visits.
For prescription drugs, moving from a 1-3 to a 1-4 ratio of generic to brand-name co-pays can save an organization a significant amount per year.
Large Employers' Health Premium Trends
Another new study, the 2014
ADP Annual Health Benefits Report, highlights significant trends in employer-provided health benefits between 2010 and 2014 among U.S. companies with 1,000 or more employees. Among the findings:
Premium increases leveling. In 2014, the average monthly health plan premium for large group plans was $870 (including employer and employee contributions), an increase of 15 percent since 2010. However, after a spike of 6.9 percent between 2010 and 2011, the rate of increase moderated and premiums rose 1.7 percent between 2013 and 2014. The cause of moderating premium costs may have been due, in part, to an increasing number of employers using high-deductible health plans with higher co-pays, or implementing spending accounts and consumer-directed health plans, the report noted.
Premium per covered life fairly constant. Employees with higher incomes tended to incur higher premiums, but they also covered more dependents. When premiums were adjusted for total covered lives—considering each insured person rather than each employee—premium costs were fairly constant among income levels, averaging $411 per month in 2014.
Dependents on parent’s plan until age 26. Several trends could be linked to the ability of dependents up to age 26 to stay on a parent’s health policy if the plan offers dependent coverage. Higher premium costs in older age groups may have been linked to the growing likelihood that a covered employee could have covered dependents who may be up to age 26. Among those age 30 and under, the coverage acceptance "take rate" declined 7.6 percent between 2010 and 2014.
Employers contributing slightly less. In 2014, large employers contributed 74 percent of the premium cost for those with dependents, whereas those with no dependents experienced a 77 percent employer contribution share. Employer contributions to health premiums declined slightly for all groups from 2010 to 2014, within a tight range of -1.0 percent with no dependents to -1.5 percent with dependents.
When designing additional cost shifting in their health plans, employers should keep in mind that the ACA also requires that plans be "affordable" and provide "minimum value." Affordability is determined if the plans meets
one of the three IRS safe harbors for determining that the employee's contribution for self-only coverage doesn't exceed 9.5 percent of the employee's household income. Minimum value requires that the plan covers at least, on average, 60 percent of an employee's medical expenses (see the
SHRM Online article
What's 'Affordable' Coverage Under the Affordable Care Act?).
Stephen Miller, CEBS, is an online editor/manager for SHRM.
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