Benefits experts have estimated the expected average increase in employer health insurance premiums from 2019 to 2020, and the consensus hovers around a 6.5% year-on-year rise. This is up from recent years when the average year-on-year increase varied from 3%–4%. Why is this?
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There are many opinions. If we focus on the reality that the U.S. health insurance industry is one ecosystem that combines individual, government-provided, and employer health plans into one mega-risk pool, an important factor arises: the effective cancellation of the individual mandate as of January 2019.
Adverse selection is reestablishing itself as a major health market influence, and the voluntary opt-out of some of the youngest, healthiest insureds will certainly have an impact on the market overall. Add to that the recent addition or expansion of alternative plans (short-term limited duration insurance and, if cleared by the courts, association health plans), funding mechanisms (qualified small employer health reimbursement arrangements (QSEHRAs), individual coverage health reimbursement arrangements (ICHRAs), and excepted benefit health reimbursement arrangements (EBHRAs)), and the process of pricing, and responsibility splitting is starting to resemble “the Wild Wild West.”
Meanwhile, employers are actively pursuing another solution to soaring costs: wellness programs. In 2018, 62% of large firms and 37% of small firms offered their employees the opportunity to complete a health risk assessment and, in many cases, offered employee health premium reductions for completing those assessments. Biometric screenings, telemedicine, and tobacco cessation programs are all gaining popularity among employers. After all, these programs achieve the dual purposes of lowering employer costs—with an average $1.50 return on every dollar invested—and developing a healthier workforce.
The Adoption Problem
So, here employers sit, approaching 2020 with new plan types, new provider network arrangements, new funding vehicles, and new wellness programs—a series of moving and interrelated gears that even the most dedicated HR professionals struggle to fully understand. In too many cases, the traditional 1-hour annual benefits open enrollment orientation simply doesn’t cut it when new plans are introduced.
The impact of a workforce’s lack of understanding of new plan offerings can be profound. People won’t buy what they don’t understand. Kaiser Family Foundation, which has been tracking overall employee health plan selection every year since 1988, reports that high-deductible health plan (HDHP) enrollment, which jumped from 24% to 29% between 2015 and 2016, has somewhat stagnated since then and was recorded at just 30% for 2019.
One additional challenge is ongoing employee education. Wellness programs are most effective when they focus on chronic health conditions and convey to employees the information they need to control those conditions. Rand Corporation studies report that when considering employees’ 10 most frequently diagnosed chronic health conditions (hypertension, diabetes, atherosclerosis, and mood disorders, for example), there is significant leverage in cost control for employees with more than one diagnosed condition. While only 28% of an average employer’s workforce will have 3 or more of these conditions at the same time, those 28% account for an average 67% of total healthcare spend within the overall employee population.
The HR Technology Solution
If lack of plan adoption and employees’ failure to achieve optimal wellness are the problems, HR professionals have the solution: their human capital management technology suite of applications. Both of these issues revolve around a lack of effective employee communication and training, and HR technology can address that.
Tools that used to be optional in the open enrollment process are quickly becoming mandatory. These include simple Web integrations like plan documents, Affordable Care Act (ACA) disclosures, and provider directories, as well as more detailed analyses like plan comparison and cost projection tools. A simple “pop-up” glossary of terms is almost essential now if an employer is including innovative new plan options in its healthcare choices. Here are comparative examples:
Example One: Negative Neil
Neil has been with his employer for 5 years and has elected family coverage in the “high” preferred provider organization (PPO) plan each year. His monthly employee contribution is $180, and with plan terms specifying a total out-of-pocket annual maximum of $3,400, he has contributed $1,200 per year to his healthcare flexible spending account (FSA), as well. His family has been relatively healthy in 2019, and he has about $500 left in his FSA.
His employer, Acme Mfg, is introducing a new HDHP with a savings option (SO) for 2020. Neil sees that his annual deductible switching from the PPO to the HDHP would rise from $500 to $2,800 and his premium per month would fall from $180 to $90, but he would lose access to FSA features he’s familiar with. Neil is interested but can’t remember all that was said in the benefits orientation and can’t find anything online that explains these changes in simpler terms. He also believes that he will lose his $500 carryover capability for his FSA balance if he changes plans. He decides that the safe bet is to stay with his PPO plan for 2020.
Example Two: Positive Paul
Paul’s situation is exactly like Neil’s—he has the same 2019 elections and utilization, and he also has a $500 FSA balance at year end.
In Paul’s case, Acme provides a pop-up glossary of terms, plan comparison tools, easily comprehensible plan details, and even a readily accessible set of three 10-minute courses in the learning management system (LMS) that walk employees through the differences they’ll experience when switching from PPO to HDHP. In particular, Paul is intrigued by this “SO” designation as part of the HDHP title and learns not only that he can contribute to the HDHP (contributions he’ll never lose) but also that Acme will contribute a full $1,400 per year of employer funds to his health savings account (HSA). Finally, he learns that because Acme offers a limited-purpose FSA option in 2020, he won’t actually lose his $500 FSA balance from 2019; he will only be restricted to using it for auxiliary plan expenses like vision and dental. Armed with this information, Paul calculates that he will save as much as $600 per year after all healthcare spending is considered by switching to the HDHP, and if his young family stays as healthy as they were in 2019, he’ll potentially have a valuable HSA balance to take with him if he ever leaves Acme. Paul enrolls in the HDHP.
Creative use of HR technology can mean the difference between a highly successful rollout and a mediocre reception. While employer collection of health risk assessments is a good first step in establishing a program, experts agree the real value in wellness programs is found in the follow-up communications, training, and advice to participants, particularly for employees with chronic health conditions. The best way for employers to ensure their employees are receiving truthful, relevant, and reliable wellness information (supplemental to the employees’ own doctors’ advice, of course) is to offer that information through their own training facilities.
LMSs, curated content for those systems, and even gamification of the wellness process are essential elements that can, from a return-on-investment perspective, more than pay for themselves in lower healthcare costs. The bottom line: HR technology, including modern toolkits for smarter open enrollment, LMSs, and employer-provided content to improve wellness program effectiveness, has transitioned from a “nice to have” to “need to succeed” status in the current healthcare economy.
Bob Greene currently serves as Channels Manager and Sales Trainer at Ascentis. During his 40 years in the human capital management industry, Greene has assisted organizations in a vendor/partner role, as a practitioner, and as a consultant, using the latest software and service solutions for Human Resources management systems, payroll, and benefits system design, as well as acquisition strategies.