Costs Continue to Rise for Employee Health Benefits

Source: BusinessWire

Wells Fargo Insurance survey finds medical costs projected to increase in the high single digits in 2013

SAN FRANCISCO--(BUSINESS WIRE)-- In a finding that will likely not surprise many businesses in the U.S., the cost of claims in employer-sponsored health plans continues to rise, according to a survey from Wells Fargo Insurance. Although rates remain consistent compared to six months ago, the survey of more than 70 insurance companies nationwide found that overall claim costs will continue to increase in the high single digits next year. The Wells Fargo Insurance Employee Benefits Survey was conducted between July and August 2012.

“Despite ongoing efforts to control healthcare expenses the survey found that insurers are not expecting a drop in claim costs for 2013,” said Dan Gowen, senior vice president of Wells Fargo Insurance’s national Employee Benefits Practice. “This means that employer premiums will likely rise, and it’s also likely consumers may pay more for their share of employer-sponsored healthcare plans. Employers seeking to minimize cost increases should explore more sophisticated ways to maintain and improve the health risk of employees and maximize their benefit investment.”

The survey also found that dental cost trends are lower than medical trends due to lack of cost shifting from public to private plans, and a negative cost impact from improvements in the dental technology field. Finally, survey results indicate prescription costs are down slightly, due to greater availability and the use of generic drugs.

Wells Fargo Insurance has been conducting this biannual survey since 2008 to measure national healthcare trends. Reflecting claim activity over a six-month period, projected increases in the national average cost of claims include the following:

  • Health maintenance organizations (HMO) – 8.5 percent
  • Point-of-sale (POS) – 8.7 percent
  • Preferred provider organizations (PPO) and consumer driver health plans – 9.3 percent
  • Exclusive provider organizations (EPO) – 9.4 percent
  • Indemnity plans – 10.2 percent
  • Prescription plans – 7.6 percent


In addition to healthcare reform provisions, claim trends are influenced by price inflation or deflation (changes in unit prices for the same services), increased or decreased use of services, population age, leveraging effect on benefit design, changes in provider treatment patterns, improvements in technology and drug therapies, and cost shifting.



Exercise Benefits Low-income Americans Most



Here’s at least one advantage to not having a hefty salary: Low-income Americans experience a bigger emotional payoff for exercising and eating well.

According to The Gallup-Healthways Well-Being Index, low income people report a bigger emotional boost from frequent exercise and good eating habits than richer people do.

The Emotional Health Index score is based on Americans' self-reports of positive and negative daily emotions, as well as self-reported clinical diagnoses of depression. Findings are based on 180,299 interviews with American adults conducted between Jan. 2 and July 8.

Low-income adults who exercise three or more days per week are about seven percentage points more likely than their counterparts who exercise less than that to report experiencing happiness “a lot of the day yesterday.” Those Americans experience a bigger exercise bonus than do those with higher incomes in terms of daily smiling and laughter, enjoyment and happiness. They're also less likely to experience depression than higher income adults who exercise.

U.S. adults at all income brackets who ate five or more servings of fruits and vegetables at least four days per week reported widespread emotional health benefits, the report notes. But it is particularly evident in those earning less than $36,000 per year.



Companies are seeking alternate health coverage offerings in the face of a shaky economy and the potential impact of the health care reform law, according to a new report by J.D. Power and Associates. The study found that employers are considering such options as defined contributions, vouchers and exchange purchasing in an effort to control spiraling health care costs. Employers, however, seem committed overall to continuing to offer health benefits. The study found that only 13 percent of fully insured employers and 14 percent of self-insured companies said they probably or definitely will not offer employer-sponsored benefits in the future.

6 Tips to Engage Gen Y Employees

By Dr. Ronald Leopold

Benefits are typically structured to reward and motivate employees who stay at the company for the long haul. For example, retirement rewards and paid time off usually get sweeter as time goes on.  Dangling a long-term benefits carrot makes sense for driving retention right? — Perhaps not when it comes to Gen Y workers.  As companies focus on attracting and keeping a pipeline of Gen Y employees, I maintain that, when it comes to benefits, it is time for a mind-shift from long-term to a short-term value and appeal.

The annual MetLife Employer and Employees benefits survey tells us that Gen Y employees really, truly value their benefits.  This is the generation hardest hit by the recession — experiencing underemployed and unemployed and in debt forever with student loans.  Sixty-six percent of these younger workers say that, because of economic conditions, they are counting on more help from employers through employee benefits.  In addition, they are more satisfied with their benefits than any of their generational co-workers (52% compared with 36% of older boomers.)

For ten years, the MetLife study has shown a strong correlation between employee loyalty and being satisfied with benefits.  However, here’s the kicker.  Despite being super-satisfied with benefits, the study shows that more than half of Gen Y intends to be the first out the door looking for a new job!

This contradiction does not mean that Gen Y workers are a self-centered, disloyal bunch. In fact, they take their careers and their financial futures very seriously. Rather than being grasshoppers in the job market, they are serial resume builders.   To them loyalty is demonstrated by high performance not by how long you stick around.  This is a challenge for employers who are conditioned to investing in employers when they join the company, in hopes of payback measured in decades.

I suggest that employers accept the inevitable and ask themselves what they can do to create a benefits program that delivers what Gen Y workers need and want today and not in some rosy future.

Here are some examples to consider:

1. Flexibility matters. Gen Y values generous time off policies and freedom to work when and where they like.  Work-life balance is more important to Gen Y than any other generation – 50% say it makes them feel loyal to their employer.  This is a powerful retention carrot. If you offer it, they will take it – but will not take advantage.  Don’t send mixed signals about use of this benefit.

2. Gen Y prefers choice and customization when it comes to benefits.  With inelastic benefits budgets the solution for this preference is voluntary benefits.  This generation is used to reaching into their wallet for their benefits, so give them the choices they crave with employee-paid insurance products – from car insurance to pet insurance.

3. Gen Y is serious about their finances and concerned about risk.  Provide liberal life and disability coverages from day one. Offer supplemental buy-ups to ensure adequate coverages.

Financial education in the workplace is highly valued at all levels — from basic financial literacy to sophisticated investment advice.  Turn to carriers to deliver low-cost/no cost programs.

4. Health coverage is a big concern.  Sixty-eight percent of Gen Y survey respondents are concerned about paying health care premiums and out of pocket costs. Help them meet these costs with affordable supplementary health products such as dental and vision coverages. These are popular benefits that you don’t have to be sick to use.

5. Advancement opportunities drive loyalty — more than their employers realize. The MetLife Study shows that 66% of Gen Y cite this as an important loyalty driver, yet only 42% of employers are on board. Don’t make employees have to move out in order to move ahead.

6. Text and Tweet to build engagement – communicate in preferred ways to build a benefits bridge to Gen Y.

Benefits are a powerful draw for attracting Gen Y to a company – 56% of Gen Y report that benefits were an important reason why they chose their current employer. They may not collect a gold watch from you, but you can motivate them to stay as long as possible by providing benefits that clearly help them solve immediate problems and needs.


Behavioral health costs account for 6% of health plan spending

By Lisa Gillespie

Behavioral health, including depression and stress, is an increasing area of concern to employers, according to the Disability Management Employer Coalition 2012 Behavioral Risk Survey of small, mid-sized and large companies. The concerns and costs — including direct medical expenses, lost productivity, workers' compensation and disability payments — are made more challenging due to the uncertain future of the Patient Protection and Affordable Care Act.

The survey found that direct costs of mental health care represent around 6% of overall health care costs and nearly 30% of young adults (those aged 18 to 25) were estimated to have had a diagnosable disorder, which is more than any other age group. The estimates for adults between the ages of 26 and 49, and those 50 and over were 22.1% and 14.3%, respectively.

Overall, 11.4 million U.S. adults — about 5% of the adult population — have a disorder that greatly impairs their ability to function in daily life. According to the DMEC survey, 47.7% of respondents believe behavioral risk is an important emerging area of concern. Forty percent include a behavioral component in their integrated or coordinated disability/absence management program.

The survey indicates adoption of behavioral health programs could be impacted by the uncertainty surrounding health care reform. Under PPACA, individual and small group insurance plans will most likely be required to offer parity in behavioral health benefits.

With 78.3% of respondents noting that their behavioral health component is a "carve-in" and is attached to their health plan, they may be reluctant to add/develop programs such as behavioral health if they have to "carve it back out" due to the potential for increasing health insurance costs and the uncertainty associated with the legality of PPACA.

Behavioral health conditions are among the most widespread, damaging and yet preventable illnesses from which people suffer,” says Marcia Carruthers, CEO of DMEC. "It is heartening that awareness of behavioral health and its costs to employees, employers and the entire health care system continues to grow. Employers need legal and regulatory certainty to enable them to effectively manage and reduce these costs."

IRS Provides Guidance on Health FSA $2,500 Limits

In a recent Notice, the IRS provided guidance on the effective date of the $2,500 limit on salary reduction contributions to health flexible spending arrangements (“Health FSAs”) and on when plans should be amended to comply with the limit

Background. Under the Patient Protection and Affordable Care Act (“PPACA” or “Health Care Reform”), the annual contributions permitted for an employee under the Health FSA component of a Cafeteria Plan will be capped at $2,500. This is effective for “taxable years” beginning after Dec. 31, 2012.

New guidance. Notice 2012-40 provides the following guidance and clarifications regarding the $2,500 limit.

  • The $2,500 limit does not apply for plan years that begin before 2013.
  • The term “taxable year” refers to the plan year of the cafeteria plan (and not the tax year of the employee or employer). This means the period for which salary reduction elections are made.
  • If a cafeteria plan has a short plan year beginning after 2012, the $2,500 limit must be prorated accordingly.
  • The $2,500 Health FSA cap does not apply to any other “flex credit” offered under a Cafeteria Plan (such as dependent care assistance).
  • Plans may adopt the required amendments to reflect the $2,500 limit at any time through the end of calendar year 2014, provided that they otherwise operate in accordance with the new limit requirements.
  • In the case of a plan providing the optional grace period, unused salary reduction contributions to the health FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,500 limit for the subsequent plan year.
  • If one or more employees are erroneously allowed to elect a salary reduction exceeding the Health FSA limit, the Cafeteria Plan will not lose its qualified status if: (1) the terms of the Plan apply uniformly to all participants, (2) the error was a reasonable mistake and not due to willful neglect, and (3) the excess amount is paid to the employee and treated as taxable wages.


Health Insurers Move Ahead, With or without Individual Mandate

For the health policy world, the Supreme Court's tough questioning of the individual mandate last week was a seismic event.

But in Hartford, Conn., the city sometimes called the epicenter of the insurance industry, David Cordani isn't quaking.

Cordani is the CEO of Cigna, the nation's fourth-largest health insurer. He says the insurance industry started changing itself before the Affordable Care Act became law in 2010. And the changes will continue regardless of what happens at the high court.

"The broader health care debate is way larger than the individual mandate," Cordani said during an interview in his sunny corner office, just a few hours after some of the justices seemed ready to strike down the mandate.

Cigna, like the broader insurance industry, hasn't taken a position on whether or not the mandate requiring Americans to buy health coverage is constitutional. Cordani points out that it really only deals with expanding care to people in the small-group and individual markets. That's a fraction of the total number of people insured, and it's not a major market for Cigna.

Cordani says the act does a fair enough job at expanding access to care, but it doesn't do as much to improve the quality of care and drive down costs. That's his focus: changing the way we think about insurance, from paying for "sick care" to paying for "health care," driving consumers to stay healthy and giving doctors incentives to keep them that way.

"What we've been doing is innovating programs around that, with or without the Affordable Care Act," Cordani says.

He says Cigna is still deciding how and where to sell insurance in the new exchanges – the health insurance marketplaces that will open for business in 2014. That's not exactly easy, according to Tom Wildsmith of the American Academy of Actuaries. Actuaries evaluate future risk, and Wildsmith says what's keeping them up at night is trying to figure out who they're going to be covering next year.

"The challenge with health care reform is that it injects some uncertainty in the system that means that, even in the aggregate, we don't know exactly how things are going to work out," he says.

Even if all of the rules were set in stone, there's still uncertainty about who will be in a particular insurer's risk pool and what the Supreme Court will do.

Among insurer worries: If the mandate goes, will the young and healthy buy in or will they wait until they are sick to buy insurance? And what if a state's new baseline coverage – called essential health benefits – is just too expensive?

"If essential health benefits package means that many of their customers will have to buy up from a Yugo to a Chevy, they are concerned that they may lose some customers in the buy-up process," Wildsmith says.

Karen Ignagni, CEO of America's Health Insurance Plans, the industry lobby, says insurers aren't waiting to find out. They're working with hospitals and doctors to change the way care is paid for and to keep costs down, just as Cigna's Cordani wants. She cites two studies that say Medicare plans run by private insurers are succeeding at keeping seniors from being readmitted to the hospital after procedures.

"We're leading the way, according to government data on readmissions," she says. "That's a win-win on both sides. There's real data now to support the contention that these strategies and these tools work very, very effectively."

What wouldn't work, Ignagni says, would be to ditch the individual mandate and still make insurers continue to accept all comers regardless of the status of their health.

"In every state that tried market reforms without bringing everyone into the system, we saw those markets blow up," she says.

Insurers will be just fine — particularly if the part of the law that subsidizes insurance for lower income Americans survives the Supreme Court challenge, according to Mila Kofman of Georgetown University's Health Policy Institute.

"We're looking at billions of dollars into the pockets of the health insurance industry," says Kofman, who is a former superintendent of insurance in Maine. "So I'm not worried about the health insurance industry and their financial health at all. This is going to be very good for their bottom line."

In fact, even on the day the Supreme Court looked like it was ready to toss the individual mandate, Cigna's stock was up 4 percent and other insurers saw similar gains.

By Jeff Cohen, WNPR