Jun 06, 2016

Health Insurance Sticker Shock: What Are You Doing About It?

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The 2017 benefit year is one that is going to be more challenging than ever. While insurers have through August to file their 2017 plan offerings, what we are seeing so far leads us to believe that increases will be substantial and having a strong strategy moving forward is going to be more important than ever to manage healthcare costs.

If you follow small business health insurance trends, it will come as no surprise only 54 percent of small businesses offer health insurance - as compared to 97 percent of larger businesses. And, despite the availability of new small business health insurance options, the majority (56 percent) of small business employees still purchase coverage through an employer.

The coverage rate has decreased slowly from 67 percent in 1999. This is according to a new study by the Kaiser Family Foundation (KFF) that analyzed offer and coverage rates in 2014.

  1. Lower income people are less likely to have employer coverage.
  2. Larger businesses are much more likely to offer coverage.
  3. Over the past 15 years, the percentage of employees with coverage through work has steadily declined - especially among small businesses.
  4. Businesses that offer health benefits tend to employ older and higher wage earners.
  5. In response to health reform’s employer mandate, the most common action taken by larger businesses is not to reduce employees’ hours. Rather, the most common action is to change some positions from part-time to full-time so more employees would be eligible for benefits.

*sources: KFF and JAMA

Why are costs continuing to rise so much? We have identified a few factors for you:

The cost of care is rising: Costs are rising due to several factors, one of which is that prescription drug costs growing particularly fast. That trend will likely continue, as more high-cost specialty drugs come to market. For example, a hepatitis C drug could run as much as $80,000 - $90,000 per patient for the duration of the treatment.

Federal program providing subsidies to marketplace insurers is going to end in 2017: Since 2014, the federal government has reimbursed health insurers who enroll higher-cost consumers in their plans through a reinsurance program, which has gradually reduced the amount of payments each year. In 2017, those payments will end entirely, which could push prices up 4 percent to 7 percent.

Insurers have a better understanding of the risk pool: Across the board, insurers set their premiums to reflect their expenses with the actual risk of those enrolled. While we don’t know how this will affect rates in 2017, we already know that healthier enrollees have bypassed Obamacare altogether, which affects premiums across all markets.

This is called "risk adjustment," which redistributes funding from insurers with healthy members to those with sicker members. Risk adjustment was a key provision included with the passage of the 2010 Affordable Care Act. But the calculation for determining who is healthy has been widely disputed, causing any insurer that grows membership to be classified as having healthy members.

Insurers are subsequently shuffling around millions of dollars to their competitors, and hiking premiums to make up for it.

At the end of the day, the burdens for the cost changes (increases) fall on the consumers and employers. And, many employers lack a strong strategy to address the instability in the marketplace.

Here are some ways we expect to combat these high costs:

We are focused on improving your bottom line for long term health of your business.

Change impacts the consumer and we believe that employee benefits are a yearlong strategy, not a transactional one. Since 1929 we have put our Members first and have a 99% retention rate as a testament to our success. Now, more than ever is a great time to put a strategy in place built by your industry advocates so you can focus on growing your business.

Please contact us to learn more about our programs and we look forward to working with you.