Taking Stock of Consumerism
LITTLE ROOM LEFT FOR COST-SHIFTING
Sharing more cost with employees to make them partners in slowing benefit cost growth has been a part of movement to build healthcare consumerism. PPO deductibles have risen faster than overall medical plan cost growth, rising by about 9% annually since 2012, to $966 in 2017 among mid-sized and large employers. Among small employers it’s been rising about 6%, to an average of $1,917.
At the same time, large and mid-sized employers, in particular, have moved quickly to add account-based consumer-directed health plans. Most of these are coupled with a health savings account, which had a minimum deductible of $1,300 in 2017.
There’s a reason that growing enrollment in HSA-based CDHPs has helped to slow overall health benefit cost growth: Average per-employee cost is 20% less than cost for traditional PPOs and HMOs — and plan cost includes employers’ contributions to employees’ accounts. Even when compared to just PPOs with deductibles of $1,000 or higher, HSA-eligible plans still represent a savings of about 7%, suggesting that it’s not just the high deductible that produces lower cost.
Employers typically pass on these saving to employees in the form of lower paycheck deductions for premiums. As employers have added CDHPs, enrollment in these plans had been growing steadily — until last year.
BUT CDHP ENROLLMENT HAS SLOWED
CDHP enrollment growth slowed in 2017, rising only by one percentage point, from 29% of covered employees to 30%. It may be that most of the early adopters have moved into these plans already and that from here on in employees will be harder to persuade, even those who would benefit financially from an HSA. For other employees, such as those who don’t have savings or have chronic health problems, these plans might not be a natural fit.
MOST EMPLOYERS OFFER CDHPs AS AN OPTION – NOT AS A FULL REPLACEMENT
One reason that enrollment is not growing more quickly is that relatively few employers have pursued a full replacement strategy (by dropping all other medical plan options and offering only the CDHP). Five years ago, many thought full replacement would be a common scenario by now. But it’s been growing more slowly than expected.
In 2012, 6% of employers with 500 or more employees had gone full replacement CDHP at their largest worksite; in 2017, that’s grown only to 10%. At the same time, the percentage of employers offering a CDHP as an option at the largest worksite has grown from 28% to 54%.
While a carefully thought-out full replacement strategy can work well for some employers, most want to continue to offer these plans as a choice.
MEANINGFUL CHOICE VALUED BY EMPLOYEES
Employers know that their employees value choice. Enrollment data from Mercer Marketplace 365, Mercer’s bundled benefits solution, shows that even with five levels of plan richness to choose from, a material number of employees select each option, reflecting the differences in their needs and preferences.
For employers that are committed to providing employees with a choice of plans but also want to encourage CDHP enrollment among employees who could benefit from the lower premium cost and the opportunity to use the tax-advantaged HSA account, some carrots are needed. Seeding the account helps, but there are other things employers can do to address concerns.
TO MAKE CDHPs AN EASIER CHOICE, THINK OF THE WHOLE PACKAGE
There are ways to make the CDHP an easier choice for employees who would benefit from it.
Employers are adding voluntary benefits like critical illness or cancer coverage, and hospital indemnity plans. They’ve found that the take-up rate is significantly better if they offer VBs on an integrated platform with the core medical plans – 42% compared to 31% when not integrated.
Transparency tools are now offered by a total of 82% of large and midsized employers. While most employers offer these plans through the health plan, 15% have contracted with a specialty vendor to provide an enhanced resource.
TOP STRATEGIES FOR THE NEXT FIVE YEARS
It’s been estimated that only 30% of healthcare spending is “shoppable” – meaning, that individuals can make decisions about whether and where to obtain care. When someone has a serious medical condition or requires emergency treatment, control over spending shifts more to healthcare providers. Survey results suggest that employers are focusing on the 70% of spending that consumers have less control over.
The survey asked employers to identify the most important strategies for the next five years. While all of these are key, employers placed strategies to manage high-cost claims and specialty drugs at the top of the list – and with good reason. Multi-million dollar claims increased by 68% from 2013 to 2016, according to the 2017 Sun-Life Stop-Loss Research Report. Cancer treatments, which frequently involve specialty drugs, generated the highest claims. Tackling these major cost drivers is the new frontier in cost management.
Consumerism remains an important element of a sustainable health benefits program, and employers need to keep fine-tuning their consumerism strategy even as they move on to address the 70% of healthcare expense that isn’t shoppable. As a bonus, the consumerism skills that employees have learned will be useful as employers and members work together to maximize healthcare quality and value.