Midwest Employers Opting for High-Deductible Plans

By Stephen Miller, CEBS Jul 31, 2013

More businesses in America's heartland are offering high-deductible health plans to their employees as a strategy to rein in health care costs, according to the 2013 Health and Welfare Benefits Survey of employers in Ohio, Kentucky and Indiana, conducted in April and May by Cincinnati-based HR consultancy Employers Resource Association(ERA). Participating companies ranged in size from fewer than 50 employees to more than 1,000 and provided data about more than 215 health plans.

Employer preferred provider organization (PPO) plans made up 48.3 percent of the Midwest's group health plan market in 2013—a 25 percent drop from 2012. Meanwhile, high-deductible health plans (HDHPs) accounted for 48.1 percent of the market, representing a 43 percent increase from last year, the survey revealed.

From another perspective, 68 percent of responding employers had implemented an HDHP or other type of consumer-driven health plan that provides incentives for employees to shop around for cost-effective health care, including low-deductible plans with health reimbursement arrangements; 16 percent intend to offer a consumer-driven plan in the future; and another 16 percent said they are not considering offering such a plan.

Cost-Controlling Measures

The survey revealed that health care costs are not rising as much in the Midwest as in previous years. A little more than 10 percent of employers experienced an increase of above 12 percent, which is a significantly lower rate than the previous year’s level of more than 20 percent.

Increasing employees’ contribution to health care premiums and implementing a wellness program were the top two cost-containment strategies organizations used in the past 12 months, and they plan to use the same methods in the future.

Deductibles rose, on average, by 13 percent from 2012 to 2013—across all health plans. While deductibles for traditional health plans such as PPOs dipped, those for HDHPs continued to increase over the previous year’s levels.

Given that PPOs and other traditional plans can have substantially higher premiums than HDHPs and that employees are now paying a larger share of those premiums, “deductibles for traditional plans seemed to have hit a plateau beyond which employees feel the costs outweigh the benefits,” Doug Matthews, survey manager for ERA, told SHRM Online. Compared with the 2012 survey, PPO deductibles averaged $2,481 for family coverage (down 12 percent), $2,388 for employee plus children (down 6 percent), $2,193 for employee-plus-one coverage (down 6 percent) and $1,143 for single coverage (down 6 percent).

However, HDHP deductibles increased, rising to $5,659 for family coverage (up 5 percent), $5,637 for employee plus children (up 28 percent), $5,588 for employee-plus-one coverage (up 26 percent) and $2,859 for single coverage (up 11 percent).

“HR professionals at companies of all sizes are reviewing and negotiating policy proposals from health insurers for the 2014 calendar year,” said Matthews. “Employers and HR managers need to study the data and negotiate the best possible plans they can. With the major changes promised by [the Patient Protection and Affordable Care Act] coming in 2014, it’s important that employers are proactive in their attempts to reduce cost.”

Stephen Miller, CEBS, is an online editor/manager for SHRM.

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