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By Rose Hoban
For the fourth year in a row, the costs to employers for their workers’ health insurance crept upward slowly, rising only 2.4 percent nationally in 2016, according to an annual report by a large employment consulting firm.
The 2016 Mercer National Survey of Employer-Sponsored Health Plans found, on average, total health benefits cost $11,920 per employee – including employee contributions – with companies in the Southern region reporting the lowest average cost of $10,844.
The South was the only region of the US where the average cost to cover an employee actually dropped last year, by about one percent.
Data courtesy: Mercer National Survey of Employer-sponsored Health Plans, 2016
The survey also found that among firms with more than 500 employees, costs were higher, but grew at only a slightly faster rate – 2.6 percent – than for companies with between 10 and 499 employees.
Companies that answered the survey told Mercer that what increases they experienced were driven by higher costs for pharmaceuticals. The survey found that specialty drug cost increases were in the double digits for many employers.
Employers added more so-called “consumer driven” health plans in 2016, but at a slightly slower rate than in prior years. Sixty-one percent of companies nationwide offer the plans, which feature high deductibles, usually combined with some type of health savings account.
But even though bosses were less gung-ho on them last year, employees embraced the high deductible plans at a faster rate; by the close of 2016, enrollment in the plans jumped to 29 percent, up from 25 percent in 2015.
High deductible plans hold down costs for employers, as they shift more costs to workers. The plans often have lower monthly premiums for workers up front, and if they and their families stay well for the year, they don’t cost much. But those high deductibles can become a burden if a worker or a family member has significant health care costs. Those costs can result from anything from paying for a sprained ankle to owing more out of pocket when a child’s recurring ear infections.
Lower premiums seem to be driving employees to choose high-deductible plans more often. Among large employers, the average monthly contribution for an employee-only, high deductible plan runs about $84, compared to $132/month for a Preferred Provider Organization.
The high deductible plans usually come matched with a health savings account into which bosses make some contribution. About three-quarters of firms put something into the accounts to offset their workers’ costs.
The authors of the report surmise that another thing driving the spread of high deductible plans was the need for employers to stay below a cost threshold set in the Affordable Care Act that taxes so-called “Cadillac plans.” Employers made moves to adjust their offerings to avoid hitting the threshold.
But as implementation of the tax was delayed last year until 2020, and with the future of the ACA still in some doubt, the authors speculated that the growth of consumer driven plans might slow.
Skin in the game?
Part of the logic behind high deductible plans is that if consumers pay more for their own care, have more “skin in the game,” they’ll make better health care spending choices, saving money for themselves, their bosses and insurers.
In recent years, both employers and insurers have tried to make it easier for workers who have high deductible plans to shop around, offering transparency tools, telemedicine services and healthcare navigator services.
According to the survey, 59 percent of large employers offered telemedicine options in 2016, up from 30 percent in 2015.
But all the transparency tools might not be effective, according to a study published this month in the journal Health Affairs which found that “despite the proliferation of price transparency tools, it is unclear whether they facilitate price-shopping and spending reductions.” The researchers found that only 12 percent of the millions of beneficiaries in CalPERS, the California equivalent of North Carolina’s State Health Plan, used available transparency tools to help them compare prices for labs, tests, office visits and advanced imaging services.
The authors also found there was little or no savings from having the tools available for beneficiaries to use.
“Simply offering a price transparency tool is not sufficient to meaningfully decrease health care prices or spending,” the authors of the study concluded.
Another study in the same issue found only three percent of patients responding to a national survey compared prices before planning a doctor’s visit.
Even as premiums have grown slowly over the past few years, the costs of pharmaceuticals, particularly specialty drugs, have climbed rapidly. So employers are pushing their workers into drug plans that feature three, four and five tiers of out-of-pocket pricing and costs.
“Drug costs are outpacing other medical plan costs by a wide margin,” the authors noted, and “employers [are] predicting another increase of 7.9 percent at their next renewal.”
Many plans now require workers to have their prescriptions filled with generic drugs, which currently account for about 80 percent of prescriptions in the U.S.
But there are eye-popping price tags for specialty biotech drugs that treat conditions such as hepatitis C, multiple sclerosis and some cancers. Those treatments can cost upward of $100,000, and although they treat only 2 percent of the population, they account for 35 to 40 percent of drug costs.
The authors note that as many as 50 new specialty medications will be approved this year, further escalating drug price growth.