Employers have worried since the 2010 implementation of the Affordable Care Act that their costs would increase as a result, but recent data doesn’t support that narrative. In fact, growth in health-benefits costs has slowed considerably, although that’s partly because employers have taken the initiative by encouraging consumerism and emphasizing a culture of employee health.
The average per-employee cost of health benefits rose only 3.9% in 2014, according to the 2014 edition of Mercer’s National Survey of Employer-Sponsored Health Plans. While that was slightly larger than last year’s historically low increase of 3.7%, it is still well below the 7% average rate of growth over the past 15 years. With enrollment almost certain to rise in 2015 as major ACA provisions go into effect, employers need to keep up the pressure, and it appears that they are doing just that.
For example, 2014 marked the largest one-year increase in enrollment in high-deductible consumer-driven health plans (CDHPs), from 18% to 23% of all covered employees, per the Mercer survey. In addition, 3% of large employers (those with 500 or more employees) moved to a private exchange in 2014 (or will in 2015) to provide benefits to active employees, and 28% said they are likely to do so within the next five years.
As CDHPs cover more employees, they offer employers a way to mitigate growth in spending. The average cost of coverage in a CDHP paired with a tax-advantaged health savings account, $8,789 per employee, is 18% less than coverage in a PPO and 20% less than an HMO.
These plans are also a top strategy for employers looking for ways to avoid paying the “Cadillac tax” in 2018 — a 40% excise tax on health coverage that costs more than $10,200 for an individual or $27,500 for a family. Mercer estimates that about a third of employers are currently at risk for triggering the tax in 2018 if they make no changes to their most costly plan.
While new plan implementations are driving up CDHP enrollment, we are also seeing increased enrollment in existing CDHPs as employees become more comfortable with consumerism and employers provide them with tools to help manage the higher deductible. In a consumerism strategy, high deductibles are meant to give employees a financial incentive to shop more carefully for health services. But high-deductible plans shouldn’t have the effect of draining employees’ wallets, and there are steps employers can take to help ensure that doesn’t happen.
The growing availability of transparency tools is allowing more employees to compare health-provider price and quality information and factor cost into their decision making. In our survey, more than three-fourths of large employers (77%) say their employees now have access to this type of information, either telephonically, on the web or through a mobile app.
Then there is 2014’s surge in offerings of “telehealth” services, from 11% to 18% of all large employers, and from 18% to 34% of jumbo employers (those with 5,000-plus employees). These services allow employees to access primary-care services over the phone at a low cost to help keep out-of-pocket spending low. In addition, voluntary benefits like critical care coverage or a hospital indemnity plan allow employees to supplement a less-expensive medical plan at a low cost.
In a few nutshells, then, here are ways that employers can help plan members with high deductibles stretch their health-care dollars and become better health-care consumers:
- Encourage healthy behaviors by paying incentives into accounts that can be used to cover deductible expense.
- Provide access and promote use of a nurse line, concierge and/or health advocate for members to consult about care needs, provider recommendations and the approximate cost of various options for care.
- Provide access to transparency tools — technology that members can use to research cost for office visits, lab tests and prescription drugs from different providers.
- Sponsor and promote access to lower-cost care options via telemedicine and convenience care clinics for more routine health-care needs.
- If you have on-site occupational health professionals, consider transforming their role to include primary care and wellness support.
- Expert medical advice is a helpful service to help navigate members to qualified second opinions and referrals to centers of excellence.
These proactive approaches to consumerism and employee health are more than just options to be chosen at open enrollment. They can work to keep costs down throughout the year — for employers and employees. And on the evidence we’re seeing now, they are very much the wave of the future.
Tracy Watts is a senior partner in Mercer’s Washington, D.C. office and the firm’s U.S. leader for health care reform. She blogs daily at Mercer Signal: Health Care Reform. Beth Umland is director of research for Mercer H&B, based in New York.