Tracking Healthcare Benefit Costs
After years of trying to keep a lid on health-benefit costs, companies are reporting progress, but there's uncertainty ahead for HR leaders, according to recent surveys of consumers and employers.
By Lin Grensing-Pophal
Recent surveys from the Employee Benefit Research Institute, Mercer and others indicate that the upward pressures on healthcare benefit costs for employees may be easing. What this means for HR as they manage and communicate benefit information to employees.
In general, the surveys show that many companies expect to keep increases to 6 percent in 2016; others project keeping increases to five percent for the third consecutive year. MercerÂs National Survey of Employer-Sponsored Health Plans 2015 finds that the average health benefit cost per employee is projected to rise by less than 5 percent for the fifth straight year. And despite the decreasing cost trend, 54 percent of the companies plan to make some changes to health benefit programs in 2016.
Meanwhile, the 2015 Employee Benefit Research Institute/Greenwald & Associates Health and Voluntary Workplace Benefits Survey finds 50 percent of workers with health insurance coverage report having experienced an increase in healthcare costs in the past year, an historical low in the survey.
What has impacted this apparent slowdown in cost increases? While the move to high deductible plans is a cost-reduction driver, Brian Marcotte, president and CEO of the Washington-based National Business Group on Health, says improvements canÂt be attributed to any one thing. "Companies implemented more transparency, concierge services [and] wellness programs, and helped consumers navigate their options and where to find the best places for care," he says.
"The trend is good," says Marcotte. "However, itÂs higher than it should be, because the projection is above the Consumer Price Index of about 2 percent."
Last year, about 50 percent of companies jumped to a full replacement with high-deductible plans, Marcotte says. "And, a third of large companies told us that the HDP was the only option offered to employees. About 27 percent of the companies surveyed are considering moving to HDP for 2017, but prefer waiting to see if any changes are enacted to the ÂCadillacÂ excise tax, a provision of the Affordable Care Act," Marcotte adds.
"ItÂs a big change for employees when their company implements a high-deductible plan," Marcotte says. There is "sticker shock" when people see the actual cost instead of making a co-pay, so employers have softened the blow by seeding employeesÂ health care saving accounts. "It will be difficult for companies to make promises about seeding accounts due to the excise tax," he says, because of the risk of incurring the 40 percent excise tax.
According to the National Business Group on HealthÂs recent survey of employers, nearly one-half of the respondents expect at least one of their benefit plans will hit the excise tax threshold in 2018 if they donÂt take action. By 2020, about 70 percent expect one of their plans will trigger the tax.
Paul Fronstin, director of the Employee Benefit Research InstituteÂs health research and education program in Washington, says the now-delayed Cadillac tax "puts employers between a rock and a hard place. They want to offer good benefits but they want to avoid the tax."
Additionally, while there is a $2,000 penalty per worker if an employer drops coverage -- according to Mercer -- employers are spending about $11,000 per worker, he says. "The bottom line is that it would be less costly to pay the $2,000 penalty than what they are paying now. So employers are continuing to offer coverage because they think there is a business reason to do so."
While recent surveys seem to suggest some easing of employee healthcare cost burdens, all may not be as it seems. Despite some potentially positive signals, Fronstin says, "IÂd like to put my findings into context." Fronstin says that the EBRI research found that "50 percent of working adults report that they experienced an increase in premiums or cost sharing in 2015. While we highlighted that it was down from 59 percent in 2014, and the lowest since we started asking these questions in 2006, the 50 percent is not an insignificant number."
These results, says Fronstin, could be
"reflective of the fact that healthcare cost increases have been modest
and fewer employers shifted costs to workers." Or, he says, "it would
be reflective of another trend going on, which is deductibles going up instead
of premiums -- many workers might not think of higher deductibles as higher
cost sharing if they are healthy and donÂt anticipate using healthcare."
There may be other issues at play here, says, Tracy Watts, a Washington-based senior partner and national leader for U.S. health care reform for Mercer.
"Our experience with our private benefits exchange," she says, "has been that when employees have a range of medical plan choices and a decision support tool to help them really understand the trade-off between paycheck deductions and cost-sharing, they often decide on a lower level of coverage than they had before."
Fronstin notes that there are challenges for HR leaders as they continue to balance healthcare benefit costs with employee needs. "I hear from HR leaders that they are concerned about continuing to shift costs onto workers." He points to other research from EBRI that indicates moving to a high-deductible health plan resulted in a reduction in medication adherence among people with chronic conditions and an increase in emergency department visits over time.
"These are things that HR leaders pay attention to because they reduce productivity and increase healthcare costs down the road," he says.
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