Posts Tagged ‘healthcare costs’

Two Considerations For The Marketplace Open Enrollment Period

Tuesday, December 20th, 2016

The post below is a guest blog from Jay Lowe who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.

The Affordable Care Act provides the ability for individuals to buy coverage regardless of any underlying medical condition.  This guaranteed issue provision has provided millions of Americans the access to health care that was not there before.  Many who had access to group coverage have also shifted either themselves or dependents to individual plans when their group plans were too expensive or did not provide the coverage they needed.

This year’s annual Open Enrollment Period for the Marketplace has opened and we are seeing, on average, a 25% increase to the cost of individual plans.  This cost increase is forcing many who are enrolled there to re-evaluate if an individual plan is still the best option for them when other group coverage is available through an employer.  When making this decision around where to be covered, there are two important items that should be understood about moving onto or coming off of an employer-sponsored health plan.

First, the annual Open Enrollment Period for the Marketplace is not considered a qualifying event under the IRS guidelines to allow someone to drop their individual policy and enroll in an employer-sponsored group plan.  There seems to be a common misconception around this with both employers and employees.  As the costs for individual plans continue to rise, many are looking for ways to move back to an employer’s plan.  The only instance in which someone could leave their individual plan and move onto their employer’s group plan is if the group plan is in an open enrollment period.

Another thing to consider is that the Marketplace Open Enrollment Period is not a qualifying event that will allow someone to drop a spouse or dependent from their group plan (unless the group plan’s annual open enrollment period coincides.)  So those who may be considering moving a dependent to an individual plan would not have the ability to do so at that time.  However, a special provision in the rules does allow an employee the ability to make a mid-year revocation of their group plan (outside of the group’s open enrollment) and enroll in Marketplace coverage.  In order for an employee to move a spouse or dependent to an individual plan during the Marketplace Open Enrollment Period, the employee must also drop coverage for him or herself too.

Given the rising costs of individual plans it seems unlikely that many will want to shift away from the group coverage.  It is important for employers to know the rules around allowing employees to come on and off of their plans outside of their annual open enrollment period.  Employees should understand the potential pitfalls of shifting away their group plan as that could create the opposite impact of what they are trying to achieve.

Spousal Health Coverage Costs Continue To Rise

Thursday, April 21st, 2016

Guest blog from Joy Binkley who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.

Spousal Health CoverageThe cost of health insurance continues to rise, but the cost of covering one’s spouse is looking to be quite expensive for those spouses that waive their own employer-sponsored benefits. According to a recent survey of U.S. employers, the use of spousal surcharges is expected to double by 2018, from 27% to 56%. The average spousal surcharge is $1,200 per year, which is tacked on the previously determined payroll deduction.

The surcharge is going on top of the fact that employers are just asking employees to pay more to cover spouses and dependent children. More than half (56%) of employers are increasing payroll deductions for spouses, while just under half (46%) are increasing the cost to cover children. This is a trend we are seeing here in North Carolina as well. The most recent CAI 2015-2016 North Carolina Benefit and Cost Survey shows the average medical cost increasing for family rates going up 6.2% versus the previous survey’s increase of 4.4%. Employers are consistently asking employees to pay roughly the same portion as last year, which is 47% of the total premium cost.

Employers are continuing to focus on ways to impact healthcare cost. Besides asking those to pay more that are waiving their own employer plans, some are considering dropping spouses all together. The elimination of spousal health coverage is permitted under the Affordable Care Act criteria. The rational to drop coverage entirely can depend on the underlying benefit strategy. Some employers are dropping coverage due to low (or no current) participation on their plans, therefore eliminating coverage just entitles those that may be subsidy eligible to earn those governmental credits. Other may be considering it due to a financial hardship. Regardless, of the reason the current landscape is quickly changing for spousal health coverage.

Look back on the trends in spousal health coverage in 2014 and 2015, and see how the numbers have changed over the past couple of years.

Is The Classic 105 Plan Compliant With Federal Law?

Thursday, July 23rd, 2015

The post below is a guest blog from Jon Dingledine who serves as Vice President of Consulting for CAI’s employee benefits partner Hill, Chesson & Woody.

Ahealth cost compliances healthcare costs continue to rise, innovations in the marketplace continue to produce new products and ways to finance your medical insurance. One that you may have heard about recently (or are likely to soon hear about) is being touted as a tax overlay system sometimes called a “Classic 105 Plan.” The arrangement claims to reimburse 75% of unreimbursed medical expenses for employees. The program is supposed to save the employer money in premiums by raising deductibles, copays and out-of-pocket maximums.

Once the plan design has been leaned up, employees can choose to make a significant pre-tax salary reduction (in some cases as high as $15,000-$20,000 per year). The reduction amounts are held by a TPA and made available for medical reimbursements. Any unused portion in the account is forfeited at the end of the year. To make up for the significant reduction in the employees’ take-home pay, the employees are given a loan by the TPA each payroll period in an amount close or equal to the salary reduction amount. No taxes are paid on this amount because it is considered a loan, however there is no evidence that the loan is ever intended to be repaid. The loan is secured by a life insurance policy on the employee, held by the TPA. Fees paid to the TPA for the arrangement are between $150 and $200 each month, taken from the employees’ pre-tax salary reduction.

While the program claims to be ERISA, ACA and HIPAA compliant, our compliance team and other legal experts have serious concerns that this type of arrangement is not compliant with federal law, including the IRS Code. This type of arrangement can also have significant implications for the employee’s social security, the employer’s fiduciary duties under ERISA, and in some instances may subject the parties to criminal liability.

Rest assured that HCW is always reviewing the health and welfare benefit landscape, and we will continue to vet new programs and funding arrangements to ensure that the decisions your company is making are best fitted to your benefit strategy.

Are We Beginning To See Price Transparency In Healthcare?

Tuesday, May 19th, 2015

The post below is a guest blog from Jay Lowe who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.

healthcare costsAs pricing in the healthcare market continues to rise, we, as consumers of this healthcare, will begin seeking more cost-efficient ways to pay for this. Many experts agree that one way to begin to slow this rise is to become smarter with our healthcare buying decisions. A ‘smart healthcare consumer’ is one who seeks out the highest quality of care at the lowest price and understands the impact of their healthcare buying decisions.

One of the major hurdles to this is the lack of understanding on where to find information. In areas where there is a lot of competition for healthcare, costs can vary for the same procedure at different facilities. However, based on one’s medical plan, the cost to the patient may be the same by the time the deductible and coinsurance limits are met. The patient doesn’t realize there is a cost difference because his or her out-of-pocket expenses remain the same. It is the insurance company that is ultimately paying the difference, which causes potential increases to premiums at the next renewal.

This disconnect of the user of the healthcare (the patient) and the payer of the healthcare (the insurance company) is beginning to shrink as we see a shift to more consumer-driven health plans like high deductible plans and HSA-qualified plans. More of the actual charges are now being paid by the member on these types of plans. Due to this, the demand for greater pricing transparency is increasing.

We are now beginning to see the marketplace respond as third party companies are unveiling new technology designed to give us more precise information on the cost and quality of the services we seek. The Milkin Institute School of Public Health points to a number of new resources designed to give consumers cost information. Additionally, the health insurance carriers are redesigning their cost comparison tools on their member websites. Just recently, Blue Cross Blue Shield of NC introduced a new pricing tool that integrates the member’s underlying health plan to show actual out-of-pocket cost for procedures at different facilities. This gives members a true shopping experience when seeking care.

Some carriers have developed phone apps that compare expenses and outcomes for many services and procedures, allowing consumers to find healthcare providers, urgent care centers, and emergency facilities, as well as average costs for medical services.

Ultimately, we will be able to evaluate our healthcare costs quickly and easily. It will be our responsibility as consumers to use this information efficiently and hopefully make an impact to our premiums.

Are We Beginning To See Price Transparency In Healthcare?

Thursday, April 16th, 2015

The post below is a guest blog from Jay Lowe who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.

healthcare transparencyAs pricing in the healthcare market continues to rise, we, as consumers of this healthcare, will begin seeking more cost-efficient ways to pay for this. Many experts agree that one way to begin to slow this rise is to become smarter with our healthcare buying decisions. A ‘smart healthcare consumer’ is one who seeks out the highest quality of care at the lowest price and understands the impact of their healthcare buying decisions.

One of the major hurdles to this is the lack of understanding on where to find information. In areas where there is a lot of competition for healthcare, costs can vary for the same procedure at different facilities. However, based on one’s medical plan, the cost to the patient may be the same by the time the deductible and coinsurance limits are met. The patient doesn’t realize there is a cost difference because his or her out-of-pocket expenses remain the same. It is the insurance company that is ultimately paying the difference, which causes potential increases to premiums at the next renewal.

This disconnect of the user of the healthcare (the patient) and the payer of the healthcare (the insurance company) is beginning to shrink as we see a shift to more consumer-driven health plans like high deductible plans and HSA-qualified plans. More of the actual charges are now being paid by the member on these types of plans. Due to this, the demand for greater pricing transparency is increasing.

We are now beginning to see the marketplace respond as third party companies are unveiling new technology designed to give us more precise information on the cost and quality of the services we seek. The Milkin Institute School of Public Health points to a number of new resources designed to give consumers cost information. Additionally, the health insurance carriers are redesigning their cost comparison tools on their member websites. Just recently, Blue Cross Blue Shield of NC introduced a new pricing tool that integrates the member’s underlying health plan to show actual out-of-pocket cost for procedures at different facilities. This gives members a true shopping experience when seeking care.

Some carriers have developed phone apps that compare expenses and outcomes for many services and procedures, allowing consumers to find healthcare providers, urgent care centers, and emergency facilities, as well as average costs for medical services.

Ultimately, we will be able to evaluate our healthcare costs quickly and easily. It will be our responsibility as consumers to use this information efficiently and hopefully make an impact to our premiums.

Be Prepared: Healthcare Spending Projected to Escalate for Next 10 Years

Tuesday, December 17th, 2013

The post below is a guest blog from Dax Hill who serves as Principal, Health & Welfare Consultant  for CAI’s employee benefits partner Hill, Chesson & Woody. Over the past several years, we have seen medical inflation increasing at a lower rate than in the past. In fact, healthcare spending increases are at the lowest levels since the government started tracking this data in 1960.  hcw graph This may provide a false sense of security for some employers regarding healthcare costs and their future trajectory. Employers might conclude that medical expenditures are finally coming under control due to the Affordable Care Act (ACA), requiring less time and effort spent monitoring their effects on the bottom line. However, actuaries from The Centers for Medicare and Medicaid Services (CMS) recently forecasted that the nation’s healthcare spending will jump by 6.1 percent next year. They claim some of this expected rise will actually come from implementation the Affordable Care Act, but more will be the result of an improving economy and an aging population in the United States. The reason behind this forecast includes the assumption that when individuals possess more buying power, they tend to visit their providers more and pursue treatments they previously delayed during the recession. These visits and hospitalizations will contribute to overall healthcare costs substantially. There are no major solutions for cost containment planned to go into effect in the next few years, apart from projections by the CMS incorporating some modest savings regarding delivery system reforms from the Affordable Care Act. Based on these dynamics, medical expenditures are projected to increase 5.8 percent per year over the next 10 years. This means that total U.S. spending on healthcare is expected to hit $5 trillion in 2022, accounting for almost 20 percent of the economy, up from 18 percent this year. That leap is going to have a huge impact on everyone, including both employers and employees. Employers failing to act in adjusting employee healthcare benefits may find themselves substantially affected by growing costs. Employers should resist any temptation to think that the healthcare crisis has been solved with the implementation of the ACA. Healthcare cost control is an ongoing dilemma that appears to have no simple answer over the next decade. With that in mind, employers must be diligent and continue to evaluate ways to improve the health of their members and control the cost of healthcare through plan design and disease management programs. Employers will want to make sure that they are providing coverage to their employees in the most efficient way possible. This can include, but are not limited to:

  • Selecting an insurance carrier that provides deepest provider discounts, lower administrative fees and effective disease and case management;
  • Outsourcing to a benefits administrator or other business to oversee case management of employees enrolled in a plan; and
  • Considering whether self-funding or other funding options are the best option for long-term savings and plan optimization.

Other significant approaches that can be considered are launching and/or redefining company wellness initiatives, including changes in diet and exercise for participants, as well as discussing healthcare expenses with employees and how to address them. It will be important for employees to be engaged and an active participant in their own healthcare. Employees need to understand that their lifestyle decisions do impact future insurance premiums and more importantly their own health. Hill, Chesson & Woody can provide further assistance for employers who want specific advice on strategies to address the anticipated rise in healthcare costs.

Can Narrow Provider Networks Control Healthcare Costs?

Thursday, October 17th, 2013

The post below is a guest blog from Joy Binkley who serves as Principal, Health & Welfare Consultant  for CAI’s employee benefits partner Hill, Chesson & Woody.

HCW 10 16In July, leading computer chip company Intel Inc. announced that it had decided to contract directly with a single provider system rather than working with a national commercial health insurer for 5,400 employees at its manufacturing plant in Rio Rancho, N.M. This single provider system will administer Intel’s benefits for eight health plan options and better manage the firm’s healthcare costs, according to officials.

The decision to implement this system garnered national attention since it showed that one of the largest employers in the United States believes narrow provider networks is one solution to controlling healthcare expenses. This trend is also growing in popularity among some employers in North Carolina. The theory is that by establishing access to a small network of top-line providers for certain scheduled healthcare procedures and operations, employers will be offering medical services at a lower cost to both themselves and their employees (the patients).

Narrow networks have gained prominence in the wake of a recent government report detailing how even within the same region, hospital costs can vary more than $200,000 for same procedure. With narrow networks, employers and insurers can overcome such wide differences in expenses by directing employees to more affordable treatment options. Controlling these costs will keep employees and employers from overpaying for services and help manage claims and out-of-pocket expenses, while still producing the best outcomes for patients.

Tiered v. Limited Networks
There are two main types of narrow networks – tiered and limited. With a tiered network, employers can continue to offer a large carrier network to their employees, but out-of-pocket costs will vary based on chosen facility or service provider. Under limited networks, the number of providers and facilities the consumer will have access to is restricted. If a member elects to seek care from a non-participating location or provider, his or her claims may fall out of network at higher cost or be completely excluded from coverage.

Regardless of the type of network chosen, employers are learning that employees would like guidance regarding where to schedule surgeries. Employees are just as frustrated as employers about overpaying for services that can be found at considerably lower cost at nearby facilities. At the same time, employers are using more in-depth health management through member advocacy groups or trained health professionals. This allows the employers to further review treatment options with consumers and make them more aware of what is involved with costs.

Given these facts, can narrow provider networks used by Intel and other employers really save costs substantially for other businesses? Can their goals and results be adopted by other employees and replicated elsewhere?

Results May Vary
Narrow networks may serve well for limiting healthcare costs for employers through scheduled services such as a knee replacement or MRIs. Catastrophic injuries and illnesses are by definition going to services, such as a knee replacement or MRIs. Catastrophic injuries and illnesses are by definition going to require specialized assistance, however, so providing a list of predetermined locations approved for certain types of treatments or surgeries will not help when emergency care is needed.

Having said that, limiting the network of providers may not yield the same results for all employers. This is due to three primary factors:

  1. Location – Little to no competition in a specific area often means minor cost variance for services, so limiting access will not impact overall cost. Most carriers are able to run a network comparison based on home zip codes to determine if these limited networks will be beneficial. A general rule of thumb is that there is more competition in urban areas than rural ones, so companies based in the latter likely will see little benefit with narrow networks.
  2. Level of engagement – Members may have to understand there will be more responsibility expected from them for their healthcare costs. Perhaps they will have to utilize a member advocacy program to get certain types of service pre-authorized before seeking care, or conduct their own price comparison for certain services. Regardless, more guidance will be required in the plan itself to help clarify the variance in cost versus outcomes.
  3. How your health plan members consume care – Employers need to be more informed of how employees within their own group have used provider networks in the past. At HCW, we offer clients with 100 or more employees a tool to analyze group-specific data about high-cost, high-diagnosis procedures and determine how much they are costing the business. The results of either approach may support or rule out using narrow networks.

Even if your business meets these factors, realize that employees may view narrow networks as providing fewer healthcare options than previously offered. Remember that you are gently guiding your employees into understanding why they may have visit a new healthcare provider to save costs. Some may have to travel further than in the past in order to meet the terms of these networks.

Data mining tools can be used to provide an analysis of where plan members are consuming the most cost. At HCW, we use such a tool to aid the discussion on determining if a narrow network may work in our client’s favor. We can also work with various carriers to determine if the limited network aligns well geographically to incent savings as well. Contact HCW if you have questions or would like more information on these services.

Image courtesy of sippakorn / FreeDigitalPhotos.net

N.C. Employers: How Do Your Healthcare Benefits and Costs Measure Up?

Tuesday, November 30th, 2010

On Nov. 15 CAI opened up our 6th annual N.C. Healthcare Benefits and Cost Survey.  Designed with our employee benefits partner, Hill, Chesson and Woody, this survey provides employers with the information that is critical to managing their employee benefits plan, allowing for a comparison of plan designs, premiums and cost-sharing arrangements with that of other N.C. companies.

The geographic focus is one of the things that makes this survey exceptional. It has more N.C.-based data than any other employer survey out there.  The 2009/2010 survey included data from 516 N.C. employers, and we anticipate that the 2010/2011 version will include more than 600 participants.

If you make decisions or are charged with gathering information about employee benefits for your organization, I highly encourage you to participate in this survey.  All survey participants will receive a free electronic report (early March 2011) and an invitation to an in-depth debriefing of the results.  The report and debriefing will help you and your organization:

  • Compare and benchmark your benefits plan with other N.C. employers with similar numbers of employees and/or by industry
  • Get access to the data you need to develop an effective employee benefits strategy
  • Learn how other employers are reacting to healthcare reform
  • Stay competitive in the labor market

Both traditional and consumer-driven health plans are covered in the survey.  Data is further filtered by number of eligible employees, industry and funding arrangement.  In addition to the yearly numbers, the survey addresses longer term trends and competitive practices within the market.

To take advantage of this opportunity to get critical information that will help you manage your employee benefits plan, please go to http://bit.ly/cai10survey.  For additional information or survey assistance, please contact our survey team at cai-survey-team@capital.org.  For one healthcare plan the survey requires as little as 20 minutes to complete.  The survey will close on Dec. 17.

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