As health insurance premiums rise, employers hunt for options
Substantial 2018 rate increases in individual health care plans under the Affordable Care Act have sparked much media attention, but the bigger insurance story for next year may be one quietly affecting millions more Americans and their employers.
Overall, rate increases for group plans appear to be smaller than ACA individual plan increases for 2018, midstate insurance experts said, but the cumulative effect of regular yearly increases is nevertheless being felt, with many employers — especially small businesses — desperate to find cost-cutting solutions. Such solutions include a move toward self-insured plans or partially self-funded plans.
The Business Journal spoke with several insurance and human resources professionals to learn about the trends they and their clients are seeing heading into 2018.
Jason Ernest, president and CEO of Upper Allen Township-based Insurance Agents & Brokers, said he’s been seeing a broad range of group plan increases, mostly between 5 percent and 25 percent. He’s also heard about rare spikes approaching 80 percent.
Scott Radcliffe, executive vice president for employee benefit services at EHD, an independent insurance broker based in Lancaster, said that for small group plan members — between two and 50 employees — he’s seeing 2018 premium increases in the range of 9 percent to 13 percent.
“Just about everyone’s rates are going up, whether you’re a small- or medium-sized employer,” said Ted Mowery, partner at Lemoyne-based insurance brokerage Gunn-Mowery LLC.
Karen Young, president of HR Resolutions LLC in Lower Paxton Township, says that on average her clients are seeing group plan premium increases of between 15 percent and 25 percent for next year.
“It’s painful,” Young said. “It’s the worst that I’ve seen.”
Young said her clients, many of them small or medium-sized businesses, are trying to be creative in finding ways to cut costs. Their options include higher deductibles and co-pays, but she also acknowledged that employers are finding less room to maneuver there as costs mount overall. That’s especially true for smaller employers.
“When you have over 100 employees, there’s a lot more you can do with plan design to manage the costs,” Young said, but smaller companies often have less leverage over the terms being offered.
As a result, Young is seeing more clients move toward partially self-funded plans — those in which companies are partially covering the cost of their employees’ medical claims, but with a stop-loss plan in place to keep the overall cost of claims in check.
Like Young, Radcliffe sees more employers starting to seek out self-funding options. One variation on that theme is the consortium model, in which a group of employers partially self-fund, but benefit from economies of scale in banding together to purchase stop-loss insurance, he said.
Gunn-Mowery LLC created the Genesis Healthcare Consortium project several years ago. It’s a self-funded cooperative in which members can still have their own plan design, carrier and funding strategies, but rely on Genesis for administrative, compliance and stop-loss (also called reinsurance) services.
Self-funded programs typically offer employers greater transparency about claim activity, said Mowery, meaning they are in a better position to take action to minimize claims and expenses.
With that in mind, the consortium sets minimum wellness standards that companies must meet in order to participate, such as educating employees on the dangers of smoking and the benefits of healthy lifestyle choices.
“What we first want to see is that they are promoting wellness, that they’re getting the information out,” Mowery said.
As Ernest sees it, an important component of self-insurance plans is keeping employees aware of how their health care habits affects costs for everyone, themselves included — especially when they are responsible for higher co-pays and deductibles.
“As employees have more skin in the game … you see them understanding the importance of things like not always going to the emergency room for care,” Ernest said.
Young also sees promotion of health and wellness as an important focus for employers and employees, but said employees also need to think more critically about the services they receive. She said patients should feel empowered to ask questions not just about treatments and tests, but providers and costs.
In one case, Young learned that a doctor’s decision to send all patients for lab tests at a certain provider with whom he had a relationship was proving more expensive than using a different lab, which had always given good service in the past.
“In the old days, if the doctor said I needed a test for something, I would just go wherever I was told, no questions asked,” Young said. “It’s OK to question it — including whether there’s a medical need.”
“Consumers need to get better at doing that,” she added.
Costs employers can't control
No matter how diligent employers and employees are about plan design and sensible use of benefits, insurance experts acknowledge that the ever-increasing costs of insurance and care are something over which companies and individuals have little, if any, control.
Part of this, Mowery said, is a growing cost-differential between private-pay patients, as on group plans, and publicly funded patients who rely on public programs such as Medicare. Providers are seeing a larger number of public patients, but their reimbursement rates are lower and inflexible. As a result, private insurers and their clients are absorbing a higher share of the costs.
“We are paying a higher reimbursement rate for private patients than the providers are getting from Medicare,” Mowery said.
While he recognizes that it sometimes makes sense for employers to shift additional plan costs, such as added deductibles and co-pays onto employees, Mowery also feels it’s a trend that cannot continue indefinitely.
“We’re forcing employees to bear risks that they just can’t bear,” Mowery said.
For that reason, Young said it’s important for employers and plan managers to be well-versed in the needs of their employee population.
“They have to be looking at plan design, making sure that they have the most efficient plan for their group,” Young said. “If you’ve got a young population, they may not need to use their health care as much as an older population.”
“You need to know your population,” Young added. “You also need to know and trust your insurance broker as well as you trust your accountant or your attorney.”