How Businesses Can Handle Higher Employee Health Insurance Costs

Businesses find their health insurance costs increase faster than the rate of inflation per year and, in response, have to think about how they’ll absorb the expense. An issue before the Affordable Care Act (ACA) went into effect, some contemplate dropping coverage entirely or only making it available to select employees. Yet, with unemployment reaching record lows, reduced benefits often result in employees leaving for better-paying positions.
For both business and personal coverage, insurance premium increases outpace inflation for a few reasons:

• Costs are driven by demand. As a result, the number of people buying and using coverage after the ACA caused premiums to increase. In a healthy market, more people are likely to be employed and have health coverage, thus premiums go up.
• Insurance carriers trying to undercut the competition may start policyholders off with artificially low premiums. However, as the company anticipates potential losses, it opts to sharply raise the premiums to make a profit or break even.

These costs end up falling on businesses, who often pass them down to their employees. So your company can continue offering this benefit, consider the following strategies.
Higher Cost Sharing
As a common tactic, a business facing higher insurance premiums will change its cost-sharing requirements, expecting employees to pay a greater percentage of premiums or offering workers the option of dropping coverage. A company might also offer workers a fixed amount for buying a marketplace plan.
Beyond these strategies, a company may opt for:

• Higher-deductible plans with lower premiums. Roughly 81 percent of all workers have a health plan with a $1,500 or higher deductible, up from 72 percent in 2012. Ten percent of all employees shoulder plans with a $3,000 deductible.
• In line with a higher deductible, a plan may come with higher out-of-pocket costs. In 2017, a family of four paid nearly $27,000 out-of-pocket for health care costs, up 4.3 percent from 2016.
• A coinsurance model, with no copays and health insurance costs based on a percentage.
• Increasing cost-sharing for out-of-network providers and brand-name prescriptions.
• Per-premium structures, which charge based on the number of individuals added to a policy. Similarly, plans may add a surcharge if a spouse decides to enroll.
• Health reimbursement arrangements and health savings accounts (HSAs) offer alternative payment plans. For health reimbursement arrangements, the employer gives a monthly allowance to each employee, with the understanding it goes toward out-of-pocket health care expenses. For HSAs, the employee can contribute to a separate account, often designed for the same purposes.

Examine Your Claims
What are the most common issues your workers face? If you notice a pattern, you might want to offer a combination of the following:

• Workplace fitness programs, from an on-site gym to after-work fitness training.
• Targeted disease management support, if your workers are dealing with diabetes or other chronic conditions.
• Fitness trackers, which incentivize your workers to monitor their steps and other physical activity. At the same time, your carrier might offer a reduced rate if you’re putting a wellness plan in place.

Limit the Number of Tiers
Do you present a range of tiers for your workers each year, from low-deductible plans accepted at a wide range of facilities to higher-deductible options covering a smaller network? Understand that the latter doesn’t mean a drop in quality of care. If you’re looking to save on costs, consider a fewer number or a select group of plans.
If you’d like to offer higher-tier plans, limit them only to certain employees – for instance, your executive staff, who can likely afford to pay those higher costs.
Also within your offerings, give employees the option to pay for add-ons, such as:

• Dental coverage
• Vision plans
• Maternity coverage
• Life insurance and accidental death
• Disability insurance

Are you looking to adjust your company’s assortment of health care plans? To discuss or explore other solutions for your business strategy, give us a call at 203.439.2815.