- change ups
Group health insurance price increases are forcing many smaller companies to find ways to offset that cost, and some are becoming increasingly interested in enhanced wellness programs and HSAs.
When asked what is first on the agenda when he meets with clients to talk about renewals of employee benefits, Steve Olson of Berends Hendricks Stuit Insurance said it is the cost of health insurance.
“Usually we’re doing the talking because we’re bringing them the bad news that they’re getting an 18 to 25 percent rate increase on health insurance,” said Olson, a partner and vice president at the Grandville company, one of the area’s top employee benefit consultants.
Olson said increases in other types of insurance — life, disability and dental — are less, “in the single digits.”
When Olson spoke to the Business Journal, he said that morning he had advised one company that its cost of coverage through Priority Health was increasing by 24.8 percent. Group insurance for companies with fewer than 100 employees are facing typical increases of 20 to 25 percent. “It’s not good,” he added.
“Some of it is due to Obamacare,” said Olson, explaining that insurance carriers often are “scared of the unknown.”
The health care reform sometimes referred to as “Obamacare” — officially named the Patient Protection and Affordable Care Act — was signed into law by President Obama one year ago last week. Many parts of the PPACA haven’t taken effect yet, with the notable exception of the clause that extends coverage to children of employees up to the age 26.
“You add 26-year-olds to the plan — and they don’t have to be students or be IRS dependents — well, that creates a whole new (area) of potential claims. (The carriers) don’t have any actuarial history” on that, he said, so they will try to ensure that they don’t get their “butts killed” by increased claims.
Another immediate impact of the health care reform act involves preventive services, such as colonoscopies.
“If you change your plan, all preventive services are paid at 100 percent,” he said, a requirement of Obamacare. “So that’s scaring them a bit, too.”
Some companies have had a co-pay or in the case of image scans would pay a set amount, such as $150 for each scan, “but now if it’s preventive services, it’s paid at 100 percent. No deductible and no co-insurance.”
Olson conceded that there are other factors that cause health insurance to go up: “There’s still inflation, and health care cost is expensive,” he said, but added that PPACA “is kind of what’s driving it this round. The same thing happened when Hillary (Clinton) was talking about socialized medicine, as well. When it didn’t pass, the next year we were getting zero increases.”
Several experts have said wellness programs are getting much more attention from employers as they struggle to hold the line on health insurance costs.
McPhee added that those companies are “trying to contain costs,” and most said benefit plans are changing mainly because of cost increases, although only one company was deleting some benefits this year; that was an option to choose between different health insurance plans.
“Most companies are not deleting anything,” she added.
McPhee noted that one company HR manager she spoke to in March said its wellness plan was changing from one of simple participation to one focused on actual results. In some cases, employees with results from participating in a wellness program can get a discount on their out-of-pocket share of the insurance premiums.
“Within health care, the biggest issue is health management,” said Jon Snead, senior vice president at the Aon Corp. office in Grand Rapids and that location’s benefits practice leader. Based in Chicago, Aon is one of the nation’s largest providers of risk management services, insurance and reinsurance brokerage, and human resources consulting and outsourcing.
In the United States, health care spending passed $2.3 trillion in 2008, according to the Henry J. Kaiser Family Foundation. The 2008 amount was more than three times the $714 billion spent in 1990. In 2008, U.S. health care spending was about $7,681 per resident and accounted for 16.2 percent of the nation’s gross domestic product, making it among the highest of all industrialized countries. Total health care expenditures grew at an annual rate of 4.4 percent in 2008, a slower rate than pre-recession years, yet still outpacing inflation and the growth in national income.
“Employers have gotten to the point where they can’t really increase plan deductibles or co-pays and charge the employees more out of their payroll, so the focus has become: How do we better improve the health of the employees?” said Snead.
Some employers are looking closer at better management by the employee of chronic diseases such as diabetes and asthma. Much of that boils down to no smoking, regular exercise and moderation in eating and drinking.
Incentives for participation in wellness programs are in use by many employers, said Snead. Those incentives range from gift cards to reduced out-of-pocket costs paid by employees, for provable results such as weight loss and going tobacco-free.
With some individuals, however, incentives hardly make a dent in their unhealthy lifestyles. Last fall, the American College of Sports Medicine reported that a survey of U.S. adults a few years ago indicated Americans take an average of 5,117 steps per day, less than people living in Switzerland, Australia and Japan.
Some employers, said Snead, are “starting to take a more aggressive approach, where if you are found to have a chronic condition, you have to participate in a management program for that condition.”
And some organizations, he added, are turning to “wellness coaches” or programs that assist the employee to participate in wellness efforts.
Ekstrom said some of the major carriers such as Priority Health and Blue Cross stress some sort of wellness plan or plan design that reduces claims, “and are willing to offer lower pricing if the employer has employees who participate in wellness. We’re seeing a lot of that.”
When the Business Journal contacted Ekstrom, he was actually wearing a device that demonstrates how companies can “create a culture of wellness.”
“I’m looking at my belt right now; I have a pedometer on,” he said. The Campbell Group had a friendly competition among its 112 employees called March Around the Mitten. Forty-eight of them formed 13 teams that recorded their steps each day. The total was almost 11,000 miles.
“You might have made it to Traverse City or all the way to Mackinac City. We try to tie it to something people can relate to,” said Olson. The Campbell Group is near the new Davenport University campus and Foremost Insurance, a rural area that has walkways for employees to use on lunch hours.
“To be honest, the real way to get people to participate in a well program” is a financial incentive, said Ekstrom. It could be designed to lower the employee’s cost of participating in a health insurance benefit, or an improved level of benefits if they participate.
“The other part that really drives participation is having that true culture from the top down,” he added, with senior management that understands the point of a wellness program and buys into the concept — “not just lip service.”
Both Ekstrom and Olson noted that health savings accounts are a way to induce employees to make decisions that tend to hold down health care costs.
Health Reimbursement Arrangements are “going away,” replaced with HSAs, said Olson. It’s a high-deductible plan in which both the employee and employer can contribute to the employee’s HSA account with pre-tax dollars, with the account used for medical care not covered by insurance. The key is that unused amounts roll over year after year and earn interest — and are forever the property of the employee.
“Hopefully, at age 65, there’s a boatload of money there,” said Olson, which can be used for health care costs in retirement.
Employees with an HSA “want to preserve it. They start shopping for prescription drugs … and see who’s got the best deal. Well, that’s consumer engagement,” said Olson.
The HSA has been available for three or four years, Olson said, “but the premiums had not gone high enough.” Now they have.
Snead mentioned another trend. Under PPACA, Insurance Exchanges will be set up in states to create a more organized and competitive market for health insurance by offering a choice of plans, establishing common rules on pricing and providing information to help consumers better understand their options. Initially, Exchanges primarily will serve individuals purchasing insurance on their own and smaller employers, according to the Kaiser Foundation. States will have the option of opening Exchanges to larger employers a few years after implementation.
“With the pending Insurance Exchanges, we are working with health plan providers on proposed Corporate Exchanges, providing an alternative to the state-run insurance exchanges. … This is gaining traction and interest in the industry and employer groups,” said Snead.