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Rising Health Insurance Costs: Explore Your Options

It comes as no surprise to either employers or employees that health insurance costs are rising. Even when the bulk of employee coverage is shouldered by employers, workers covered under those plans are also sharing increased health insurance costs through higher deductibles and copays. An article in late 2014 by CNBC reported that employer plans increased 73% in the 10-year period from 2003 to 2013, with deductibles nearly doubling over that same period. According to the Bureau of Labor Statistics, wages and salaries for non-government employees rose 2.1% while benefit costs to them rose 2.6%.

Health Insurance Costs: A Look at the Numbers

While increasing health insurance costs are a reality for employers, it offers little comfort when pundits indicate the rate is slowing down on average. The Commonwealth Fund reported the rate of rising costs for 31 states rose an average of 5.1% from 2003 to 2010, yet only 4.1% with the initiation of the Affordable Care Act in those same states.

However, one only needs to review the graphics to realize states we often think of as industrialized (South Dakota, Indiana, Colorado and Ohio) experienced an increase of health insurance costs from 6.7 to 7.5%. This is in contrast to the mostly southern states (Florida, North Carolina and Louisiana) that grew grew from .01 to 1.7%. Some demographics of each state do not appear to have been taken into consideration, such as the fact that rates of employer-sponsored insurance have dropped in recent years. Size of companies (under 50, over 50, and large scale businesses) and their nature are likely significantly different depending on the state and the comparison may not be equitable.

Overall averages of health insurance costs are more readily impactful looking at the actual numbers vs. dry statistical data. Forbes, quoting the Kaiser Family Foundation/Health Research & Educational Trust 2014 Employer Health Benefits Survey, stated that family health insurance premiums for employer-sponsored plans in 2009 averaged $13,375. By 2014 that amount grew to $16,834. That growth in health insurance costs represented double the amount of wage increase for that same period.

Health Insurance Costs: A Look at the Options 

There are a number of reasons for increased health insurance costs—making the burden manageable is Alltrust's main goal for your organization. Understanding the alternatives might open the door to other less expensive possibilities. Sometimes, though, the best solution may be to select the least objectionable option.

Private Exchanges

A growing trend within the insurance market is to look to private exchanges to cut health insurance costs. This type of coverage has mixed reviews and largely depends on the size of an organization and variables such as whether they are, or were, self-insured or contracted for commercial coverage. The advantages are the flexibility and, depending on the exchange, shared liability without being lumped into a community-rated price point. Again, this largely depends on the size and experience of the group.

High-Deductible Health Plans

High-deductible plans can be an answer depending on the nature of a company’s demographics. The plans are less costly, but while younger employees tend to be healthier, they generally have fewer resources to draw on when there are serious illnesses, accidents and pregnancy issues. Older employees may or may not have the funds to pay the deductible when it comes to medication and chronic disease inherent to that population.

PPOs & HMOs

As for other choices that can reduce health insurance costs, plans with limited networks such as PPOs (Preferred Provider Organizations that refer patients to specialists within their network) and HMOs (Health Maintenance Organizations that keep everything in-house and require a primary clinician to decide which patients require a referral). Economically these may be prudent, but they require using only designated clinicians and facilities.

Indemnity Plans

An indemnity plan (also known as “fee-for-service” or FFS) with managed care is yet another option. All other options may negatively impact employees with children who do not live in the same geographic area. An advantage of FFS plans, as seen by consumers, is a set copay or deductible they can opt for. 

A study by the National Bureau of Economic Research demonstrated notable differences that may be indicators of quality of care. One example is that managed care patients admitted to hospitals for cancer treatment underwent fewer tests than those covered by fee-for-service plans (this may or may not be significant). However, when it came to surgical procedures, the managed-care patient frequently had a surgeon who performed fewer procedures for the patient’s particular type of cancer. The indemnity patient surgeons had a higher volume and more experience with the specialized surgery. The authors did note, however, that managed care plan physicians varied in quality, just as those who receive fee-for-service payment.

In the end, the best way to harness costs is to know about the corporate culture of the vendor and to recognize that good providers who are proactive versus reactive may help prevent illness and control disease. That helps control runaway health insurance costs.

To discuss your options when it comes to rising employer-sponsored health insurance costs, CLICK HERE to speak with an Alltrust Specialist.