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Sunday, 13 September 2015 20:16

Employers considering high-deductible health plans to curb costs

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Bob Hughes Bob Hughes

High-deductible health plans have become a common offering over the last half-decade for employee health benefits because they offer cost savings through lower premiums and the potential to temper the long-term growth in employee medical claims.

Annual surveys show employers are increasingly adopting lower-cost, high-deductible plans to better contain and control rapidly escalating costs.

For those employers who have not yet transitioned to a high-deductible plan or who are considering it, experts say they need to think it out carefully.

E.J. Pearson, vice president of benefits at Lighthouse Insurance Group in Grand Rapids, advises clients to make sure they communicate the transition to employees early and often and discuss the reasons behind it. Employers often couple high-deductible plans with a health savings account or health reimbursement arrangement, and employees will need time to learn about and adjust to how the new benefits work.

“There can be a lot of confusion because they are different than what people are used to,” Pearson said.

Employers should start explaining and communicating the pending change eight months to a year in advance, Pearson said. Employers need to understand as well that switching to a high-deductible plan will only generate a one-time cost savings through reduced premiums.

To build on the cost savings, employers should work in initiatives such as a wellness program that can affect their future medical claims trends that heavily influence premiums.

“You really need to think about it as a long-term strategy,” Pearson said.

The steady migration to high-deductible plans in West Michigan is seen in the results of the annual survey of employer health care costs by The Employers’ Association in Grand Rapids.

In 2015, 70 percent of survey respondents said their family health plan had annual deductibles of $1,000 to $2,999 or $2,001 to $4,000. That compares with 55 percent with deductibles of $1,001 to $2,000 or $2,001 to $4,000 in 2010.

Family plans with a deductible of $4,000 or more have grown from 11 percent in 2010 to 16 percent in 2015, according to 2015 survey results from The Employers’ Association that cover all product categories.

The number of West Michigan employers who reported having a health plan that uses an HSA or HRA also grew to a combined 33 percent in 2015, up from 20 percent in 2010.

When making the transition, employers often will offer options for low-deductible policies and high-deductible plans for an interim period of a few years or so, said Bob Hughes, president of Advantage Benefits Group in Grand Rapids. In many instances, they’ll use all or part of the savings from the lower premium to fund the company’s contribution to an HSA or HRA, Hughes said.

To encourage employees to opt for the lower-cost, high-deductible plan, employers will use an HRA or HSA contribution, build lower co-pays for doctor visits or prescription drugs into the benefits package, and require workers to pay a lower share of the premium, Hughes said.

Doing so gives employees choice in what benefits package to choose, based on their own coverage needs and what they can afford, he said. After a transition period, employers can then drop the low-deductible plans and offer only high-deductible plans with varying co-pays, premium shares and deductible levels.

“They’ve had a high-deductible plan long enough now as an option and they probably have 60 or 70 percent of the population in there, maybe even 80. They’re going to make the final step now,” said Hughes, who advises clients to build in a transition period when they move to high-deductible health coverage.

“You introduce it, you get people used to it and you increase participation,” he said. “They hear from their peers that it’s not so bad, and then you slowly move to it exclusively and you put rewards programs in there.”

Nationally, the 2015 cost survey of nearly 2,600 large employers by benefits consultant Mercer shows the use of high-deductible plans grew to 48 percent of respondents in 2014 from 39 percent in 2013 and 20 percent in 2008. Respondents to the Mercer survey reported that their high-deductible plans cost 18 percent less than a PPO plan with an HSA and 20 percent less than an HMO policy with an HSA.

Greg Kuhn, senior health care adviser at Mercer’s Grand Rapids office, expects the adoption rate for high-deductible plans to maintain its growth trajectory after accelerating “pretty dramatically” for 2015.

“The increase in the high-deductible plans was pretty significant last year and I’m sure we’re going to see the same thing this year,” Kuhn said.

As employers head toward open renewal for January 2016, Kuhn suggests those who intend to make the switch do so quickly. While transitioning to high-deductible plans can come with disruption, he believes it’s best to do it in a narrow time window. By going through an extended transition, “all you’re doing is torturing for a couple of years.”

“My experience is the sooner you get there, the better off you are,” Kuhn said. “You are going to get there anyway, and everybody says it’s difficult to do. If you do a really good job on the communication side and whatever your mechanism is with an HSA or an HRA, I think you’re much better off in the short run … getting it done.

“You know you’re going there and once you make the change, it’s a lot easier for people to understand what your plan does and what it doesn’t do with a single option versus multiple options.”

The 2014 national cost survey of about 1,000 employers by benefits firm AON found that 14 percent of respondents offered only a high-deductible plan. Another 2 percent planned to do so in 2015, and 41 percent planned to transition within the next three to five years.

While high-deductible plans can lower premium costs and ease medical claims trends as employees use the health system more wisely because they pay higher out-of-pocket costs, the packages do have potential drawbacks.

In a survey this summer by the Ann Arbor-based Center for Healthcare Research & Transformation, one in five respondents said they deferred seeking care because of high out-of-pocket costs.

The growth in out-of-pocket costs for people in the high-deductible era serves as one reason why Priority Health launched a cost calculator that enables enrollees to look up the estimated cost of care and opt for the low-cost providers in the market.

Priority Health hopes to alleviate the reluctance of some people to seek care, especially preventative care, because of worries they cannot afford it, said Chief Marketing Officer Joan Budden.

“They’re worried that something is going to cost too much and (they) stop doing it,” Budden said. “We want them to know that, ‘Hey, some of this stuff is very affordable. Just because it’s prior to your deductible or has a co-pay, that’s OK. You can still get it done.’ We think the tool is reassuring from that perspective.”

Read 2812 times Last modified on Monday, 28 September 2015 11:01
Mark Sanchez

Senior Writer

msanchez@mibiz.com

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