Can We Make High Deductible Health Plans Less Painful In The Wallet?
Updated: Jun 15, 2019
We get it. Health insurance premiums are a major pain point for everyone.
And with good reason. Whether you're an insurance company employee, an employer, employee or part of the health insurance consulting community, we've all felt the pain of rising health care costs, the rising costs of health insurance premiums and how they impact our finances and our decision making on many business and personal levels. As both business and personal consumers we have the same pain.
Don't think for a second that when an insurance company group marketing person sends a broker a 17% premium increase for their client that the person on the sales side of the health insurance company isn't nervous about how that price increase is going to be received by the broker. And that nervousness flows from broker to decision maker, from decision to employee and from employee to spouse.
It would be easy to call it "trickle down nervousness," but it's way past that.
As group health insurance brokers we're annually tweaking our clients' benefits plans to the point that it hurts, making minor premium increases only slightly (sorry for the word "slightly") noticeable to our clients' employees who in the end pay the price of medical use and medical inflation (premiums). Unfortunately, medical inflation and new regulations (ACA guidelines), have forced us to keep making plan adjustments every annual renewal. The exception has become the normal.
In no way are we implying that health insurance is not expensive for everyone and painful for most.
Unfortunately, end users (mostly employees) look at health insurance companies as the enemy and culprit to rising health insurance premiums. Our perspective is a bit different. It comes down to something like "Don't Shoot The Messenger." Health insurance companies have been providing insurance for many years and for many years was far more affordable. Insurance companies operate in a "reactive" environment when it comes to planning for next year's health insurance premium increases. They have the ongoing and almost impossible battle of balancing increases in medical inflation, costs of allowing newer and improved medical technology, improved surgical techniques and operating overhead with company profits, product delivery, ease of use, claims paying mechanics , end user consumer costs and customer satisfaction.
Imagine having a business that your entire distribution channel hated you, couldn't afford your prices, constantly complained, expected perfection, had 1,000's of unforeseen and new health issues that had to be fixed, never said thank you and was always looking for a new supplier. We say "No Thanks."
Perception is everything and premium costs are what people see first. People see quality of care as a secondary factor until they need to use these medical improvements on a personal level. Then price takes a back seat to quality of care. Look at the example of HIV - AIDS patients now as compared to 30 years ago. Thankfully, most are still alive now due to advances in pharmacology and medical treatments and are in many cases being covered by health insurance.
These reactive and defensive positions that health insurance providers need to take in their premium positioning that results in premium increases have to do with several factors that any business continually ponders; rising costs of goods, services and operating costs. As medicine becomes more science than art and cures to age old diseases become a norm, the processes become more costly. Thanks to improved screening technologies, robotics,medical and diagnostic advances, improved pharmaceutical solutions and overall patient screenings and awareness, we are living longer and healthier, and the diseases that were killing us 50 years ago are not having the same impact now as they did then. But it all comes with an expensive price tag. And we hate the idea until we need to use it.
How many of us would say "Let's not do that angioplasty because I don't want that co-payment?"
We need to look at the reality that many of these tools of diagnosis and the surgeries are expensive and are the result of improvements in screening technologies, the cost of delivering increases in human longevity and an improvement to our quality of life. And it comes at a cost that we need to accept.
We understand how painful rising health insurance costs are to both the business and it's employees. It's become an ongoing annual ritual for brokers and consultants to receive next year's group health renewals, to make minor plan adjustments and then present cost containment options to our groups. For our first 25 years in business we've been able to balance premium increases with minor plan changes.
As time as gone on, we adjusted out of network deductibles, coinsurance, and out of pocket maximum. Then as the need to find more creative ways to keep premium increases at a minimum we looked to the in network cost sharing options such as increasing primary care doctor co pays, adding in network deductibles, adding and increasing in network coinsurance and stop losses, and increasing prescription drug co-payments.
Eventually, adjusting those existing factors didn't help the final employer and employee costs so insurance companies introduced in network deductibles, coinsurance and stop loss caps to try to contain costs for employers and employees. And while medical inflation has kept rolling over health insurance consumers, we all continued to make annual plan changes and adjustments with cost containment becoming the major consideration in annual benefits decision making.
So now flash forward to today: 2019 and we're still facing ridiculously high health insurance premiums with not many plan design options left to tweak, adjust, bend or reshape before the plan breaks. What we consider a plan breakdown is when the options offered don't justify the premium dollars spent on any level for the employer sponsoring the plan and their employees. And, we're fast approaching that dilemma. The choices we're facing have become much more expensive and much more challenging for everyone.
So now we have the following options:
1- The Affordable Care Act - (Obamacare) Which unfortunately, hasn't impacted cost saving for the average business or consumer as expected and has pretty much confused the public. While it has eliminated many obstacles for health care such as pre-existing conditions it has not delivered the number of eager participants as originally anticipated or intended.
2- Traditional health plan designs - which have morphed into almost unaffordable plans.
3- HSA - Health Savings Accounts - which while great in concept doesn't help many people with ongoing health issues who can't afford to spend the money up front for both premium costs and health care. Wikipedia defines an HSA as follows: A health savings account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP). The funds contributed to an account are not subject to federal income tax at the time of deposit. Unlike a flexible spending account (FSA), HSA funds roll over and accumulate year to year if they are not spent. HSAs are owned by the individual, which differentiates them from company-owned Health Reimbursement Arrangements (HRA) that are an alternate tax-deductible source of funds paired with either high-deductible health plans or standard health plans.
HSA funds may currently be used to pay for qualified medical expenses at any time without federal tax liability or penalty. Beginning in early 2011 over-the-counter medications cannot be paid with an HSA without a doctor's prescription. Withdrawals for non-medical expenses are treated very similarly to those in an individual retirement account (IRA) in that they may provide tax advantages if taken after retirement age, and they incur penalties if taken earlier. The accounts are a component of consumer-driven health care.
Proponents of HSAs believe that they are an important reform that will help reduce the growth of health care costs and increase the efficiency of the health care system. According to proponents, HSAs encourage saving for future health care expenses, allow the patient to receive needed care without a gatekeeper to determine what benefits are allowed, and make consumers more responsible for their own health care choices through the required High-Deductible Health Plan.
Opponents of HSAs say they may worsen, rather than improve, health care in the United States because people may hold back the healthcare spending that would be covered, or may spend it unnecessarily just because it has accumulated to avoid the penalty taxes for withdrawing it, but people who have health problems that have predictable annual costs will avoid HSAs to have the costs paid by insurance. There is also debate about consumer satisfaction with these plans.
4- High Deductible Health Plans - According to Wikipedia - In the United States, a high-deductible health plan is a health insurance plan with lower premiums and higher deductibles than a traditional health plan. Being covered by an HDHP is also a requirement for having a health savings account. Some HDHP plans also offer additional "wellness" benefits, provided before a deductible is paid. High-deductible health plans are a form of catastrophic coverage, intended to cover for catastrophic illnesses. Adoption rates of HDHPs have been growing since their inception in 2004, not only with increasing employer options, but also increasing government options. As of 2016, HDHPs represented 29% of the total covered workers in the United States; however, the impact of such benefit design is not widely understood.
5- PEO - PEO's are an interesting concept arriving on the benefits scene not that long ago and are continuing to grow both in terms of company participation and acceptance. The pluses are enrolling companies can take advantage of large group benefits programs available to any size group participating in the PEO. This format is basically outsourcing company employees to a company who takes these employees onto their payroll and offers them benefits and payroll administration. There are many advantages of a PEO, but PEO's sometimes become more challenging for a small business who has to compare administrative costs of participating in that PEO (monthly costs per employee) with the cost difference of doing their own payroll internally and shopping the benefits market themselves.
According to Wikipedia a PEO is the following: A professional employer organization (PEO) is an outsourcing firm which provides services to small and medium sized businesses (SMBs). Typically, the PEO offering may include human resource consulting, safety and risk mitigation services, payroll processing, employer payroll tax filing, workers' compensation insurance, health benefits, employers' practice and liability insurance (EPLI), retirement vehicles (401(k)), regulatory compliance assistance, workforce management technology, and training and development. The PEO enters into a contractual co-employment agreement with its clientele. Through co-employment, the PEO becomes the employer of record for tax purposes through filing payroll taxes under its own tax identification numbers. As of 2017, industry gross revenues in the United States were estimated to be over US$174 billion annually.  In 2017, there were 907 PEOs operating in the United States alone, servicing 3.7 million worksite employees (WSEs), which were spread over approximately 175,000 PEO clients.
6- Self insuring of benefits. This was a popular alternative to medium size and larger companies years ago when premium cost containment was not as much of an issue. A company could allocate and reserve money in a separate medical account to anticipate the medical costs for their employee population and then purchase a stop loss plan from a health insurance company if any employee claims hit a particular thresh hold. It remains an interesting option if a company's population is large enough for the company to weather occasional large claims. It also helped if the employee population was young, male, unmarried and healthy. At one time, some companies had "soft hiring" guidelines in place forcing human resource staff to focus and target those demographics for future employee hires to stay within their self insurance population demographics.