Mitigating health care costs has been a top-of-mind concern for employers nationwide for a few years. Many want to continue to offer valuable health benefits to their current employees and want those benefits to help them attract and retain quality employees. However, they must also weigh the cost-effectiveness of those benefits at a time when hefty rate hikes are the norm.
After trying to absorb most of the costs in order to avoid hiring and retention issues, many firms are attacking the root causes of rising costs with sustained, systemic changes. With the growing epidemic of poor health and the uncertain overall impact of health care reform, employers are looking at both short- and long-term strategies to manage costs, which include making plan design changes, focusing on employee well-being and education, and implementing additional benefits offerings.
Plan Design Changes
Plan design changes can include: increasing deductibles and out-of-pocket maximums; increasing employee cost-sharing for out-of-network providers; and increasing employee cost-sharing for brand-name prescription drugs to incentivize use of generics.
According to the Kaiser Family Foundation and HRET’s Employer Health Benefits 2018 Annual Survey, most workers must pay a share of their health care costs — 85% had a general annual deductible and 58% had a deductible of at least $1,000 for single coverage in 2018. Even without a deductible, the vast majority of workers cover some portion of the costs from their in-network physician visits. For instance, 66% have a copayment for primary doctor visits and 24% have coinsurance. Nearly all workers are covered by a plan with an out-of-pocket maximum (OOPM), but the costs vary considerably. Of workers with single coverage, 14% have an OOPM of less than $2,000, and 20% have an OOPM of $6,000 or more.
Standard plans and HDHPs (high deductible health plans) are set up much in the same way. Under both plans, the member pays a premium for coverage. Both plans must cover preventive services free of charge. If a member receives non-preventive medical care, he or she pays a deductible—a specified amount of money that the insured must pay before an insurance company will pay a claim. The chief difference between the plans is that under an HDHP, premium payments are considerably lower, and the deductible is considerably higher.
The second major factor setting HDHPs apart from standard plans is the addition of an HSA (health savings account). With an HSA, the account holder or his or her employer (usually both) make contributions into a savings account. No taxes are deducted from money placed into the account, as the HSA contribution is withdrawn from a paycheck before taxes are assessed. While in the savings account, the money can earn interest. The employee is free to spend that money on qualified medical expenses.
One important thing to note about HDHPs, though, is that part of their success relies on how employees use the plan. If employees aren’t wise health care consumers, health care costs will still be high, even with the cost-sharing benefits of the plan. If you opt to implement this type of plan, you’ll need to be prepared to provide educational resources that help employees become smart healthcare consumers.
Employee Wellbeing and Education
On that note, I’ve seen employers making efforts to educate their employees on lower cost alternative points of care. For instance, consumers may pay less by using an urgent care vs. an emergency room or turning to a standalone clinic for advanced imaging instead of a hospital.
There has also been greater recognition and efforts in employee wellness in an effort to get in front of high costs down the road. An example may be in promoting healthy eating in an effort to avoid issues with diabetes or heart problems.
Additional Benefit Offerings
For younger, relatively healthy employees whose primary concern may be coverage in case of accidents, for example, instead of regular care, an HDHP may make the most sense. In these cases, I’ve seen some employers offer to fully fund an accident policy or hospital indemnity plan as an additional incentive. Even covering that cost in full still saves the company money while providing the employee with the coverage they want.
Ryan Rodrigue is managing partner at Hollis Companies, a group insurance consulting firm with over 30 years of employee benefits experience based out of Metairie. He may be reached at rrodrigue@hollisco.com.
