Health plan costs moderate, but larger increases ahead
Originally posted May 15, 2014 by Dan Cook on www.benefitspro.com.
The rate of employer-provided health care plan costs is either going up or down this year, depending on who you talk to.
Either way, the difference won’t be much. And overall, the news is good: cost hikes are fairly stable.
Towers Watson and Buck Consultants this week each released their own projections for employer health care spending for 2014. Towers Watson surveyed 173 medical carriers from around the globe; Buck got input from 126 carriers and administrators.
Want good news? Look to the Buck survey. It says the rate of increases in all types of health plans will be less in 2014 than in either of the two prior years.
Costs for PPO plans, it said, rose 8.7 percent this year, lower than last year’s 9 percent growth and the 9.2 percent seen in 2012. HDHPs show the biggest decline in cost increases, rising 8.6 percent this year compared to 9.1 percent in 2014. HMO and POS plans fell as well. For plans that supplement Medicare, though, the health-cost hike spiked to 5.5 percent from 4.1 percent last year.
The average prescription-drug cost increase for this year is 9.2 percent, down from 9.9 percent a year ago.
Buck said reduced utilization was cited by some as the primary reason for the decreases.
“This may be a result of the economic slowdown and its impact on consumers’ willingness to seek medical treatment,” said Harvey Sobel, a Buck principal and consulting actuary who co-authored the survey. “Even though the decline is good news, most plan sponsors still find 8-9 percent cost increases unsustainable.”
Meanwhile, if you’re a pessimist, Towers Watson is for you.
After two years of 9.1 percent increases, non-U.S. American plans (North American plans outside of the U.S.) are projected to rise in cost by 9.7 percent this year, its respondent said.
Globally, Towers Watson’s survey indicated that employee health benefits costs will increase 8.3 percent this year, compared to 7.9 percent last year and 7.7 percent in 2012.
Further, its respondents expect costs to start to edge up again in the future.
“More than half (55 percent) of insurers in all regions anticipate higher or significantly higher medical trend over the next three years. Asia Pacific insurers are particularly pessimistic, with more than two-thirds (69%) saying they expect medical trend in the next three years to be higher or significantly higher than current rates,” the study said.
“While the cost of providing health care benefits to employees has stabilized over the past few years, controlling rising costs remains a significant concern for employers worldwide,” said Francis Coleman, director, International Consulting, at Towers Watson. “In fact, in all regions, health costs continue to rise at twice the rate of inflation. That’s a major concern for employers, with many insurers projecting costs to again escalate in the coming years.”
IRS Urged To Broaden Preventive Coverage In High-Deductible Plans
Originally posted May 9, 2014 by Julie Appleby on https://capsules.kaiserhealthnews.org.
High deductible health plans paired with tax-free savings accounts — increasingly common in job-based insurance and long a staple for those who buy their own coverage – pose financial difficulties for people with chronic health problems. That’s because they have to pay the annual deductible, which could be $1,250 or more, before most of their medications and other treatments are covered.
In a white paper released Thursday, researchers at the University of Michigan say such plans would be more attractive if the IRS broadened the kinds of preventive care insurers were allowed to cover before the patient paid the deductible. Currently, only a limited set of preventive care benefits is included.
“I want the deductibles removed on those things I beg my patients to do,” such as getting annual eye exams if they are diabetic, says author A. Mark Fendrick, a professor of medicine and director of the University of Michigan Center for Value-Based Insurance Design.
If insurers were allowed to offer high-deductible plans that covered “secondary prevention,” such as eye exams, or insulin for diabetics, they would attract 5 million buyers on the individual market, the report projects. Many consumers would see the policies as an improvement over more “bare-bones” coverage, even if the premiums were higher, said co-author Steve Parente, a professor of finance at the Carlson School of Management at the University of Minnesota. At least 10 million in job-based insurance might also switch, some of them from more expensive plans that have limited networks of doctors and hospitals, Parente said. Such plans would be most attractive to those with chronic conditions such as diabetes, asthma or high blood pressure.
“If it is attractive to the chronically ill, it could be a major change,” said Parente. The Gary and Mary West Health Policy Center, a nonpartisan research group in Washington, D.C, funded the report.
Still, such plans would carry premiums at least 5 percent higher than current high-deductible health saving account plans, according to the report.
Whether the IRS would consider changing the rules for high deductible plans connected with health savings accounts is unclear. The agency did not respond to questions. If it altered the rules, insurers would also have to choose to offer the plans.
Currently, more than 15 million Americans have high-deductible plans that can be paired with tax-free savings accounts, called HSA-eligible plans, according to America’s Health Insurance Plans, the industry trade group. Of those, about 2 million buy their own policies and the rest get them through their jobs.
Under federal rules, such plans must have at least a $1,250 annual deductible for singles and a $2,500 deductible for families. Workers can contribute money pre-tax to the special savings accounts to help pay those deductibles. Most large employers offer such a plan as an option and an estimated 15 percent of firms offer only HSA plans or a similar arrangement, called a health reimbursement account, according to the benefit firm Towers Watson.
IRS rules say only primary prevention can be fully covered by the plan outside of the deductible, including such things as routine prenatal and well-child care, some vaccines, and programs to help people lose weight or quit smoking. The rules say such preventive care does not generally include treatments for “existing illness, injury or condition.”
Fendrick and colleagues want the definition changed to allow insurers and employers more options, including allowing coverage of any kind of medical services, including drugs that would prevent complications from or a worsening of a chronic condition, such as diabetes, heart disease or major depression.
“This would be entirely optional for health plans,” Fendrick said. “One plan could [cover] just about everything before the deductible, and another might say they cover five or six drugs, some doctor visits and maybe glucose test strips.”
Employers Eye Moving Sickest Workers To Insurance Exchanges
Originally posted May 7, 2014 by Jan Hancock on www.kaiserhealthnews.org.
Can corporations shift workers with high medical costs from the company health plan into online insurance exchanges created by the Affordable Care Act? Some employers are considering it, say benefits consultants.
"It's all over the marketplace," said Todd Yates, a managing partner at Hill, Chesson & Woody, a North Carolina benefits consulting firm. "Employers are inquiring about it and brokers and consultants are advocating for it."
Health spending is driven largely by patients with chronic illness such as diabetes or who undergo expensive procedures such as organ transplants. Since most big corporations are self-insured, shifting even one high-cost member out of the company plan could save the employer hundreds of thousands of dollars a year -- while increasing the cost of claims absorbed by the marketplace policy by a similar amount.
And the health law might not prohibit it, opening a door to potential erosion of employer-based coverage.
"Such an employer-dumping strategy can promote the interests of both employers and employees by shifting health care expenses on to the public at large," wrote two University of Minnesota law professors in a 2010 paper that basically predicted the present interest. The authors were Amy Monahan and Daniel Schwarcz.
It's unclear how many companies, if any, have moved sicker workers to exchange coverage, which became available only in January. But even a few high-risk patients could add millions of dollars in costs to those plans. The costs could be passed on to customers in the form of higher premiums and to taxpayers in the form of higher subsidy expense.
Here's how it might work. The employer shrinks the hospital and doctor network to make the company plan unattractive to those with chronic illness. Or, the employer raises co-payments for drugs needed by the chronically ill, also rendering the plan unattractive and perhaps nudging high-cost workers to examine other options.
At the same time, the employer offers to buy the targeted worker a high-benefit "platinum" plan in the marketplaces. The plan could cost $6,000 or more a year for an individual. But that's still far less than the $300,000 a year that, say, a hemophilia patient might cost the company.
The employer might also give the worker a raise to buy the policy directly.
The employer saves money. The employee gets better coverage. And the health law's marketplace plan --required to accept all applicants at a fixed price during open enrollment periods -- takes on the cost.
"The concept sounds to[o] easy to be true, but the ACA has set up the ability for employers and employees on a voluntary basis to choose a better plan in [the] Individual Marketplace and save a significant amount of money for both!" says promotional material from a company called Managed Exchange Solutions (MES).
"MES works with [the] reinsurer, insurance carrier and other health management organizations to determine [the] most likely candidates for the program."
Charlotte-based consultant Benefit Controls produced the Managed Exchange Solutions pitch last year but ultimately decided not to offer the strategy to its clients, said Matthew McQuide, a vice president with Benefit Controls.
"Though we believe it's legal" as long as employees agree to the change, "it's still gray," he said. "We just decided it wasn't something we wanted to promote."
Shifting high-risk workers out of employer plans is prohibited for other kinds of taxpayer-supported insurance.
For example, it's illegal to induce somebody who is working and over 65 to drop company coverage and rely entirely on the government Medicare program for seniors, said Amy Gordon, a benefits lawyer with McDermott Will & Emery. Similarly, employers who dumped high-cost patients into temporary high-risk pools established by the health law are required to repay those workers' claims to the pools.
"You would think there would be a similar type of provision under the Affordable Care Act" for plans sold through the marketplace portals, Gordon said. "But there currently is not."
Moving high-cost workers to a marketplace plan would not trigger penalties under the health law as long as an employer offered an affordable companywide plan with minimum coverage, experts said. (Workers cannot use tax credits to help pay exchange-plan premiums in such a case, either.)
Half a dozen benefits experts said they were unaware of specific instances of employers shifting high-cost workers to exchange plans. Spokespeople for AIDS United and the Hemophilia Federation of America, both advocating for patients with expensive, chronic conditions, said they didn't know of any, either.
But employers seem increasingly interested.
"I have gotten probably about half a dozen questions about it in the last month or so from our offices around the country," says Edward Fensholt, director of compliance for the Lockton Companies, a large insurance broker and benefits consultant. "They're passing on questions they're getting from their customers."
Such practices could raise concerns about discrimination, said Sabrina Corlette, project director at the Georgetown University Center on Health Insurance Reforms.
They could also cause resentment among employees who didn't get a similar deal, Fensholt said.
"We just don't think that's a good idea,” he said. "That needs to be kind of an under-the-radar deal, and under-the-radar deals never work," he said. Plus, he added, "it's bad public policy to push all these risks into the public exchange."
Hill, Chesson & Woody is not recommending it either.
"Anytime you want to have a conversation with an employee in a secretive, one-off manner, that's never a good idea," Yates said. "Something smells bad about that."
HSA enrollment jumped in 2013: Fidelity
Originally posted May 7, 2014 by Jerry Geisel on www.businessinsurance.com
Enrollment in health savings accounts continues to surge as more employers are moving to consumer-driven health care plans, Fidelity Investments said Wednesday.
Fidelity said in a statement that the number of HSAs it administered in 2013 jumped to 269,000; up nearly 48% compared with 182,000 in 2012 and a 126% increase over 2011, when Fidelity administered 119,000 HSAs.
“Fidelity continues to drive adoption of its health savings account business as companies and their employees realize their potential advantages both today and over the long haul,” Will Applegate, a Fidelity vice president in Boston, said in the statement.
Numerous surveys have found that the cost of high-deductible consumer-driven health care plans linked to HSAs are less costly compared with other health care plans.
For example, a survey last year by Mercer L.L.C. found that the cost of coverage in CDHPs with HSAs is about 20% lower, on average, than the cost of preferred provider organization coverage — $8,482 per employee compared with $10,196 per employee for preferred provider organization coverage.
That cost difference will become even more important starting in 2018, when a health care reform law provision that imposes a 40% excise tax on health care plan costs exceeding $10,200 for single coverage and $27,500 for family coverage kicks in.