We recently sat down with the Employee Benefits team at Harmon Dennis Bradshaw for a “Q & A” session centered on Employer Sponsored Health insurance plans; specifically, why the cost continues to rise and what employers and employees alike can do to combat the issue. Here is what we discovered.
Question: We constantly hear from employers that their health insurance premiums are skyrocketing year after year. In your opinion, what is the root cause of this?
Answer: How much time do we have, again??? There are numerous reasons why health care costs continue to be on the rise; some are obvious and some not as much. For one, the cost of “delivering” care has continued to increase, most notably in the pharmaceutical space (but going down that rabbit hole would require more time than we have today). Another reason for the continued spike in healthcare cost is the ongoing epidemic of what often times can be preventable chronic diseases like heart disease and cancer. It is well known that poor nutrition and obesity often lead to heart disease. It is also a known fact that smoking leads to lung cancer. Chronic health conditions are very expensive to treat; the higher the cost of care, the higher the premiums. Finally, a reason that we stress to our employer groups all the time is that Americans, by and large, are still poor “consumers” of their health care.
Question: When you say that Americans are still poor consumers of their health care, what do you mean?
Answer: When I say “poor consumers”, I mean that there is still a large majority of our population that continues to utilize the healthcare system the way they have always been accustomed to. For one, people tend to be more reactive instead of being proactive. A proactive approach starts with maintaining a healthy lifestyle; taking care of yourself. It also includes the use of “preventative services” that are available in health insurance plans; i.e. annual physicals and age-appropriate health screenings. These services can detect a potential health issue before it turns into one, thus saving healthcare dollars from being spent. The less healthcare dollars spent, the lower the health insurance premiums. People also tend to be reluctant to question their healthcare providers. When a physician prescribes a medication, we encourage individuals to ask questions like “is there a generic equivalent?” Don’t be afraid to ask your provider if the recommended course of action is necessary. Better yet, ask your provider to make sure their recommendation is covered by the health insurance plan.
Question: What are some steps that employers can take to change this type of culture within their work force?
Answer: There are several things that employers can do to steer their employees to better “Consumerism” of their health care. First and foremost, EDUCATION. We are very big believers in employee education; not only in educating them on how their health benefits are designed but also on how to best utilize those benefits. As I mentioned before, a lot of people still use their health insurance benefits the same way they always have. It is our job as advisors, along with the employer, to better educate the employees to modify their health care consumption. For one, save the emergency room for true emergencies; do NOT treat the emergency room as your primary care provider! For instance, if it’s the middle of flu season and you wake up with a fever and flu-like symptoms; don’t go to the emergency room for treatment. Instead, either contact your primary care provider or go to a nearby Urgent Care clinic. Emergency room services are much more expensive than urgent care services, thus driving the claim utilization higher for the health plan. TELEMEDICINE. Telemedicine is a great tool that has been built into many health plans already. We encourage employers to implement telemedicine into their health plans with a $0 copay in order to incentivize the employees to utilize the benefit. Telemedicine allows employees and their family members to bypass their primary care physician and/or an urgent care clinic for common ailments such as sinus infections, coughs, colds, flu, etc. There are several benefits to utilizing telemedicine:
- The employee can have a consultation from their home, work or anywhere without having to go to a physical location;
- The employee saves money if the plan is set up with a $0 copay, and;
- By utilizing the telemedicine benefit, they have saved the health insurance plan from having to pay an unnecessary claim.
INCENTIVES. Incentives in the work place like Smoking Cessation Programs, Gym Membership Programs and Wellness Clinics are great ways to promote a healthier lifestyle for employees. All of these are excellent tools for employers; however, it is imperative that the employees are properly EDUCATED on what is available to them and how they can access and utilize these tools.
Question: So, now that we’ve addressed some of the causes of rising health care costs and health insurance premiums and what employees can do to combat these problems; what type of health plan strategies and options do employers have at their disposal to decrease and control their health insurance premiums?
Answer: Let’s break this down into three parts based on different employer group types – Small Group and Fully Insured; Large Group and Fully Insured; and Large Group and Self-Insured.
- Small group primary health plans do not have a lot of flexibility, meaning they are what they are. Most people are familiar with the “metallic level” plan offerings; Platinum, Gold, Silver and Bronze with Platinum offering the best coverage (at the highest rate) and Bronze offering the least coverage (at the lowest rate). The rates for these plans are based almost solely on the age make-up of the group and claim utilization is not taken into account. We do not have the ability to customize metallic plans. Our primary goal with Small group employers is to deliver the best possible coverage at the lowest possible rate. Our primary strategy for achieving this goal is the implementation of “Secondary insurance”. Most groups have been accustomed to either Platinum or Gold level types of coverage but the rates to keep these plans have continued to climb to an un-affordable point. With secondary insurance, we are able to move our groups down to the Silver plan, which saves a considerable amount of premium, and then use some of the savings to purchase a secondary insurance plan. The secondary plan will pay towards the employee’s primary plans calendar year deductible as well as their Inpatient and outpatient facility copays. The net result is that we end up with a plan that costs much less than the Platinum and Gold with the same or better benefits for the Employee.
- Large group employers (100+ full-time Employees) are afforded more flexibility than small group employers. With large groups, we are able to tailor a primary health plan the way we want it designed. Unlike small groups, claim utilization is the driving factor for the primary plan rates. With that in mind, shifting claims away from the primary insurance carrier, while saving premium dollars and maintaining the integrity of the employees health benefits, is the primary goal. Secondary insurance is yet again our preferred tool to achieve this goal. We are able to raise the primary plan’s deductible which effectively does two things, saves primary plan premiums but increases the employee’s out of pocket exposure. Again, we take some of the savings and purchase a secondary insurance plan to accompany the primary plan. By raising the deductible, we have shifted claims away from the primary carrier, meaning they pay less in claims. The less the primary plan has to pay in claims, the better the primary plan rates are going to be at renewal. We have had tremendous success with our large employer groups by implementing this secondary strategy.
- Self-insured employer groups are offered the most flexibility. This type of arrangement is generally reserved for much larger groups, typically those with at least 300 employees. In a fully-insured arrangement, groups pay a set premium to the insurance carrier and the insurance carrier pays the claims. If the carrier pays less in claims than they receive in premium, the carrier keeps the excess. With a self-insured arrangement, the employer group is the party paying the claims out of their own assets. Since the employer is the one on the hook for the claims, plan design is vital. We work with the employer to come up with a suggested funding amount and an expected claims paid amount. We help them select the best health care network, the best pharmacy benefit provider, the best stop-loss carrier, etc. These are key factors in maintaining the financial stability of the health plan. When done correctly, this type of arrangement can provide a much more stable health plan for employers to offer their employees.
Question: In closing, is there anything you’d like to add?
Answer: Our topic today was whether or not employers can “keep this up”? My answer to that question is yes, they absolutely can. The key is partnering with an Advisor that can lead them in the right direction by helping them with their health plan design and then educating their employees on how to best utilize their health benefits. We are ready, willing and able to do just that.