With the Labor Day holiday behind us, and as we approach the last quarter of 2013, the time is right to take a look at trends in employer sponsored health plans and how benefit offerings could be changing in the year ahead. 2014 will see the implementation of several key parts of the Affordable Care Act (ACA), such as the elimination of annual dollar limits on benefits an individual may receive and the elimination of pre-existing condition exclusions, which alone will contribute significantly to the changes in what employer sponsored plans will look like.
The 15th annual Kaiser Family Foundation and Health Research & Education Trust (Kaiser/HRET) Survey of Employee Health Benefits provides a good backdrop for thinking about your own plan offerings and what options you might consider for the future. As a starting point, it might be interesting to take a look at what the healthcare landscape was like just ten years ago, when federal healthcare reform was still years away and high deductible health savings plans were only a concept:
- Since 2003, the average annual premium for family coverage has increased 80%, from $9,068 to $16,351.
- Average annual employee contributions for family coverage have increased by 89%.
- The average annual deductible for PPO-plan single coverage was $275 in 2003, while it now hovers just below $800.
All this points to what we all know - that aggregate healthcare costs for both employers and employees continued to rise, in spite of efforts to keep them under control. The good news for 2013 is that the annual percentage increases in overall premiums were generally modest, (5% for single coverage and 4% for family coverage), though higher than the inflation rate of 1.1%. Similarly, the employee percentage contribution for both single and family coverage remained essentially stable compared to past years at 18% and 29% respectively. Only high deductible health savings plans (HDHP) had statistically lower average premiums when compared to those for all plan types combined.
total annual premiums
- HMO - $6,029 for single coverage, $16,543 for family coverage
- PPO - $6,031 for single coverage, $16,671 for family coverage
- POS - $5,972 for single coverage, $16,429 for family coverage
- HDHP - $5,306 for single coverage, $15,227 for family coverage
- All Plans - $5,884 for single coverage, $16,351 for family coverage
annual employee contributions
- HMO - $1,081 for single coverage, $5,124 for family coverage
- PPO - $1,024 for single coverage, $4,587 for family coverage
- POS - $957 for single coverage, $5,590 for family coverage
- HDHP - $887 for single coverage, $3,649 for family coverage
- All Plans - $999 for single coverage, $4,565 for family coverage
plan design trends
Plan enrollment by design type (PPO, HMO, POS, HDHP) has remained fairly unchanged since last year (and from the previous five years in general), although enrollment in HDHPs appears to have plateaued at least for the moment since reaching 19% in 2012
. Other plan design elements include:
- Copayments continue to be the most common type of cost-sharing for plans with a general annual deductible. The average office visits copayments are $23 for primary care and $35 for specialty care.
- Copayments are also the most common type of cost-sharing for prescription coverage with averages of $10, $29 and $52 for first-, second- and third-tier medications, respectively.
- Coinsurance, however, remains the most common type of cost-sharing for hospital admissions and outpatient surgery at an average of 18% for each, although a small percentage of plans have either a separate deductible, copayment, a per day payment, or some combination thereof.
- Annual out-of-pocket maximums for covered workers vary widely from under $2,000 to over $5,000 and it is not uncommon that many expenses, such as office visit and prescription copayments and/or deductibles, are not considered towards the annual limit. (The ACA will soon require that all cost sharing be counted in the calculation of the annual limit which could provide greater clarity for participants.)
- Twenty-one percent (21%) of covered workers are in a plan with a total annual family premium 20% below the average, while another 21% of workers are in a plan with a family premium 20% above the average.
- The average annual family premium is $1,100 lower in small firms (<200 workers) than in large firms, though workers in small firms typically contribute a higher average percentage towards that coverage than their counterparts in large organizations, (however, contributing a slightly lower percentage towards the cost of single coverage).
- Employees in companies with a higher percentage of lower-wage workers (at least 35% earning $23,000 or less) generally contribute a higher percentage for both single and family coverage.
- The average annual deductible for single coverage at large organizations is $884 compared to the average of $1,715 at small organizations.
Employers are employing a variety of methods to promote healthy lifestyles while attempting to control costs. Among these are health risk assessments, biometric screening, disease management programs and wellness programs such as gym memberships, weight loss and smoking cessation programs and Employee Assistance Programs (EAPs). Large organizations are more likely than smaller organizations to offer wellness programs (99% versus 76%) and a small percentage of large firms (11%) require employees to go through biometric screening before enrolling in a health plan, and an equal percentage provide a financial incentive or penalty based on the outcome of the screening. Also of note:
- A quarter of employers have a high-performance (value-based) network as part of at least one of their health plans and may provide a financial or other type of incentive to participants who use these networks. (A high-performance network seeks to include providers that are considered more efficient and/or provide a higher quality of care.)
- A majority of employers (56%) now specifically include coverage for services received at retail health clinics, (e.g. at pharmacies or grocery stores), such as for the treatment of minor illnesses and preventive services such as vaccines.
- Fifty-four percent (54%) of companies shopped for a new plan in 2012 and of those 18% changed carriers and 15% made a change in the type of health plan(s) they offered.
Employers continue to practice the art of balancing the high cost of healthcare with providing attractive benefit plans as employees continue to consider their employer sponsored benefits as a key factor to their overall job satisfaction.
With the complexity of healthcare in the United States unlikely to diminish, the task of effectively communicating with employees about the monetary value and services they receive from their employer sponsored benefits will be more critical than ever.
The Kaiser/HRET 2013 Employer Health Benefits Survey
was conducted between January and May 2013 and includes responses from a telephone survey of 2,067 public and private employers with three or more workers. If you have any follow-up questions, please be sure to let us know.