Survey details strategies employers use to lower health care costs

Pennsylvania’s employers aren’t using just one strategy to save money on employee benefits amid rising health care costs.

A survey of 110 Pennsylvania businesses by Harrisburg-based financial advisory firm, Conrad Siegel, showed more companies are adopting additional methods to save money while still offering their employees competitive benefits.

Businesses of various sizes reported in Conrad Siegel’s annual Medical & Rx Drug survey that they are using strategies such as switching to self-funded plans, setting parameters for spousal coverage and promoting urgent care visits when offering their employees benefits.

Some 83% of respondents were from the midstate, 5% from western Pennsylvania and 7% from the northeastern end of the state.

The survey, in its 14^th year, reflected only small changes from last year, said Rob Glus, partner and consulting actuary at the firm. The data, overall the 14-year period, shows that businesses are using more of the strategies.

“Over the past five years, employers have trended towards numerous cost-containment strategies,” Glus said. “Contextualizing the data with policy changes of the last decade adds another layer— we’re now seeing the impact of these changes on a broader scale.”

One of the biggest changes over the past five years has been the number of employers who have transitioned to self-funded plans, according to the survey. In 2013, 40% of employees limited their insurance costs by taking on risk and paying for their employees’ claims. That number has now grown to 58%.

The 18% increase isn’t surprising to Glus, who said that switching to a self-funded plan means that employers can save on administrative costs and avoid both state insurance taxes and taxes incurred through the Affordable Care Act.

High Companies LLC in East Lampeter Township, a client of Conrad Siegel’s, self-funded in 2010. Liz Ford, the company’s compensation and benefits director, said High Companies made the transition after facing annual increases in the cost of their renewals.

“One of the benefits was that you have greater access to what is driving your cost,” Ford said. “If you are fully insured and just paying the premium every month, the insurance company owns that data and they don’t share that data with you. When you become self-funded you own it.”

In recent years, smaller companies have increasingly been willing to take the risk of funding their own plans, said Glus. He added that while self-funding has its advantages, leaders need to do a careful analysis of their company to ensure that they can take on the risk.

Spousal coverage has also been a hot topic in the benefits space, with many employers creating provisions to either require a surcharge for a plan to cover an employee’s spouse or refuse to provide access if coverage is available through the spouse’s employer.

Spousal provisions grew in popularity amongst respondents in recent years, with 40% of employers reporting in the survey that they used some form of spousal provision in 2016, rising to 45% in 2017. That trend lost traction last year, as the survey reported that only 38% of respondents used a spousal provision.

The drop in spousal provisions may not be indicative of the entire story in Pennsylvania, according to Glus. As employers add spousal provisions to their plans, they are incenting spouses off of their plan and onto their employer’s plan. In turn, that employer may want to add an incentive to ensure they aren’t allowing their costs to rise.

High Companies also has parameters for spousal coverage. When the company enacted a spousal rule that closed the plan to spouses who could be covered by their employers, 100 spouses out of High’s 2,000 employees became ineligible.

Some of the first employers to have such a provision were local school districts, said Ford, who noted that High began seeing the trend grow after receiving forms from the workplaces of their employees’ spouses.

“Most of our employees, if they had a teacher as a wife, were on the school district’s plan,” she said. “We started to get these forms and had to tell (the schools that our employees were) getting coverage here and they had to go on our plan.”

In the past five years the average cost of co-pays grew by about $25 at urgent care facilities and about $50 in emergency rooms, the survey showed. This caused more employers to prompt employees to choose smaller clinics over hospital visits when they can.

The survey found that companies with less than 100 employees typically offer co-pays between $61 and $80 for urgent care visits, and $151 to $200 for the emergency room. Companies with more than 100 employees kept cost lower with co-pays ranging from $41 to $60 at urgent cares and $81 to $150 at emergency rooms.

The average prescription drug co-pay rose by 9 to 14%, with retail formulary drugs costing an average of $35, the survey reported.

“We really try to stress the importance of understanding how the site of care impacts out-of-pocket expenses,” Ford said. “We have tried to explain to our employees that going to an independent lab for bloodwork versus a lab at a health system can save them hundreds of dollars.”

Ford also suggested speaking to employees about using ambulatory surgical centers as well as urgent cares to keep co-pays low.