Health benefit costs are predicted to rise by 4.3 percent in 2018, the highest since 2011, according to Mercer, a global health and benefits administrator. Cost for pharmaceuticals is also expected to rise more than 7 percent as spending on new specialty medications is expected to skyrocket. How will this affect employers?
Parr: For small groups (less than 100 employees) it can have a significant impact as their rates are based on the pool of all small group employers in California and there is little an individual employer can do. However, since the implementation of the ACA, we have seen smaller small group health insurance renewal increases overall versus years prior to the ACA.
And increased competition with new carriers entering the North Bay marketplace (Western Health Advantage, Sutter Health Plus) has helped minimize HMO increases as well. To offset the year-after-year increases, however, some employers are dropping certain benefits (i.e. dental, disability, and vision), reducing their employer contribution, implementing HRA plans, and/or increasing their group health insurance plan deductibles.
Fradelizio: Those people who know me well understand that I always try to be an optimist, but I am afraid my answer to this question would be “negatively.” In addition to the negative impact on employers, this may also portend peril for employees, as well.
The Health Care Cost Institute just reported that the cost of health care spending is up, even though Americans are actually reducing their consumption of health care services. Moreover, a recent study showed that roughly two-thirds of Americans report that the cost of health insurance is a source of stress in their household. Given the figures cited above, I do not expect any of this to improve, especially in the short term.
Shields: The 4.3 percent is a global figure. In California small and mid-sized groups are continuing to see increases between 8–10 percent for small groups and 10–15 percent for mid-size(d). The increase is going to be what it is and I’ve gotten used to it. In my 40 years in the industry there have only been two years when the rates have not gone up. But the bottom line is it will affect employees negatively.
Employers can provide extra arrangements to employee health plans, which are also tax-advantaged, that reimburse employees for out-of-pocket expenses. They can be used by the employee to pay for their portion of health care premiums, as well as qualified medical expenses such as lab fees, eye exams or prescriptions.
Last year, Congress passed a new law allowing smaller employers to use health reimbursement arrangements to pay for nongroup plan health insurance premiums, including plans purchased on health care exchanges under the ACA.
Will more employers will start offering health-reimbursement arrangements?
Parr: I see the only employers potentially implementing this type of health-reimbursement arrangement would be those who have young, healthy employees with very little turnover. It makes more sense in my opinion to offer a traditional Health Reimbursement Arrangement Group Health Insurance plan that provides a cost-sharing mechanism between the employer and the employee for deductibles, co-insurance, calendar year out-of-pocket maximums, co-pays, etc.
And traditional small-group and large-group HRA plans are most always administered by a third-party administrator who can provide the broker/agent and the employer with detailed claims information to measure performance/claims data, savings/costs, and usage trends to customize the plan design.