A new study has found that most employer-sponsored family health plans are increasingly unaffordable for workers due to rising costs and them footing a significant part of the premium, even with employer assistance.
Workers at smaller firms, defined as those with fewer than 200 employees, are especially affected as they typically have to pay a larger share of the family coverage premium than their large-employer counterparts (38% vs. 25%), according to the 2023 Kaiser Family Foundation “Employer Health Benefits Survey.”
The amount workers at small firms pay for single-only coverage is comparable to what their counterparts at larger firms pay (17% of the premium vs. 18%).
While family-plan premiums are similar for workers in small and large firms ($23,621 compared to $24,104 on average), due to the higher percentage cost-sharing, employees in small firms are paying significantly more for their share of the premium ($8,334 per year vs. $5,889 at larger firms), according to KFF. Moreover, 25% of workers at small firms pay over $12,000 yearly for family coverage, excluding deductibles that are also often higher.
For low-wage workers that’s a tall order, made worse by the fact that those at small employers typically earn less (an average of $44,600 a year vs. $63,200 for workers at larger firms).
On top of higher premium layouts, workers in small firms may also pay higher deductibles and have higher out-of-pocket medical costs:
About 59% of employees in small firms have a family-plan deductible of at least $3,000 before the plan will start covering most services.
Some 34% of workers in small firms have a family-plan deductible of at least $5,000, and it may be higher if multiple family members have to spend towards the deductible during the plan year.
What small firms can do
While small employers really can’t do anything about rising group health plan costs, they can take steps to ease their employees’ premium obligations and out-of-pocket costs:
Assume more of the premium — If it’s within their budget, they can increase the amount of family coverage premium they will cover. This is not something that is feasible for many companies, but for those who are interested in attracting and retaining talent who have their own families, they may need to.
Offer more plans with narrow networks— Narrow networks do reduce premiums, and that’s a huge draw for both employers and their employees. But consumers also benefit from these plans through lower overall out-of-pocket expenses.
Narrow networks contain longer-term costs by encouraging individuals to develop a relationship with their primary care providers. Cost savings come from increased use of PCPs and decreased, or more-efficient, use of specialists.
These plans provide a way to contain costs without sacrificing care, but because they’re comprised of local, community-based medical providers they’re best for a workforce that works at a single location and therefore lives within proximity to the job site/office.
Offer high-deductible health plans — A high-deductible plan’s upfront costs are less expensive than a preferred provider organization or health maintenance organization. According to KFF, the average HDHP family coverage costs $22,344 a year, nearly $3,000 less per than a PPO plan and nearly $1,500 less than an HMO.
With that lower premium, employees can set aside additional funds into an attached health savings account, a tax-benefited vehicle that is funded through pre-tax payroll deductions. HSA funds can be used to reimburse for health care expenses, including those towards deductibles.
The explosion in demand for new, costly and highly effective weight-loss and diabetes drugs is poised to play an outsized role in increasing the cost of health care, and in turn, health insurance in America.
These groundbreaking drugs — the most popular sold under the brand names Mounjaro, Ozempic and Wegovy — are partly to blame for overall pharmaceutical benefit costs jumping 8.3% in 2023, compared to an increase of 6.4% in 2022, according to a report by Mercer.
The effects are amplified because of the high cost of these drugs — around $1,000 a month — as well as the growing legion of patients being prescribed them.
On the other hand, these GLIP-1 drugs, as they are known, show great promise in helping tackle the obesity epidemic in the country, which contributes significantly to medical costs.
They were originally designed to treat diabetes, but they had a surprising benefit: weight loss, sometimes so significant that patients’ glucose levels dropped below diabetic levels, and the medications are now being prescribed for weight loss in patients without diabetes.
Employers and insurers are now faced with the prospect of exploding drug costs if demand continues to boom and doctors write more prescriptions for them. To head that prospect off, they are trying to formulate approaches that could keep costs from spiraling while still attending to the demand for weight-loss regimens.
Booming demand
While Novo Nordisk A/S’s Ozempic and Wegovy have been on the market for some time for treating diabetes, the latter has been approved to treat obesity using smaller doses. While Ozempic has not been approved for weight loss, doctors commonly use it off-label for weight loss as well.
In November 2023, Eli Lilly & Co. won clearance from the U.S. Food and Drug Administration for its new drug called Zepbound — a version of its diabetes drug Mounjaro — to be used to treat obesity.
People who take these medications can see dramatic weight loss, which has spurred a surge in prescriptions. In 2022, 5 million GLP-1 prescriptions were written, a 2,082% increase from 2019. The market for these drugs is expected to grow to between $100 billion and $200 billion a year within the next decade.
The manufacturers have been struggling to keep up with demand, with Novo Nordisk saying it will take two years to build up production capacity to meet demand. As it does that, it has limited the availability of lower starting doses of Wegovy as it prioritizes a continuous supply of the pharmaceutical for people who already use it.
One of the biggest challenges with these drugs is that people who stop taking GLP-1 drugs regain most, if not all, of the weight they lost. That may require a lifetime commitment to taking these medications for some individuals. Also, many people stop taking these drugs because they say they have no longer derive pleasure from eating, rendering dining a boring experience.
What employers and payers can do
While employers cover the use of GLP-1 drugs as a treatment for diabetes, the story changes when covering them for treating obesity.
The list prices for the drugs — before any copays or coinsurance — range from $936 per month to about $1,350.
GLP-1 drugs are already recommended for treating certain high-risk type 2 diabetes cases, the majority of which are due to obesity. It’s likely that many individuals with type 2 diabetes will end up on a GLP-1 drug at some point anyway.
Mercer’s “National Survey of Employer-Sponsored Health Plans 2023” survey of employers with 500 or more workers found that:
35% cover GLP-1 drugs for treating obesity with prior authorization and/or reauthorization requirements.
7% said they cover the drug with no special requirements.
19% said they don’t cover these drugs but are considering it.
40% said they are not considering covering these medications.
According to the Mercer report, some employers have reversed previous coverage of GLP-1 drugs for obesity after utilization spiked, saddling their health plans with a surge in pharmaceutical costs.
For employers who want their plans to cover GLP-1 drugs but need to cap their health care costs, experts recommend a step program for people struggling with obesity as it can help patients lose weight at a lower cost:
Step one — Focuses on helping the patient change their lifestyle through dietary changes and exercise.
Step two — Focuses on education and ancillary services, such as food delivery or mental health support.
Step three — If they still need help, doctors can prescribe first-generation anti-obesity medications, which are less expensive and often generate satisfactory weight loss.
Step four — If all else fails, doctors prescribe GLP-1s if the plan covers them, fully or partially.
Mercer also recommends that for individuals who have achieved their desired weight loss and health improvements through GLP-1 drugs, physicians may want to consider tapering them off them at some point, while focusing on sustaining the weight loss and improved health through adhering to lifestyle changes.
American employers are trying to meet their workers’ mental health needs as they struggle with burnout and stress from their jobs and finances, according to a new report.
The annual “Aflac WorkForces Report” found that more than 50% of American workers experience burnout in their workplace. Additionally, 57% experience work-related stress, with heavy workloads the biggest stressor among young workers.
The survey results also showed found that employees are struggling with their mental well-being, and that employers can help by providing their staff with mental health tools and resources.
The poll also found that only half of workers (48%) had confidence that their employers cared about their well-being. This is a significant decline compared to 56% and 59% in 2022 and 2021, respectively.
In 2023, 89% of employees are experiencing mental health challenges like depression, anxiety and trouble sleeping, the survey revealed. The overwhelming majority of millennials (64%) and Gen-Z (67%) face high levels of burnout in the workplace.
In contrast, most employers (78%) believe their workers are satisfied.
The biggest stressor
Aflac noted that one of the biggest causes of stress and anxiety among workers is unexpected medical expenses. Moreover, while many employees have financial resources to cover medical emergencies, the state of financial wellness among the workers remains fragile.
According to the survey, 51% of American workers have savings to pay medical bills (a 6% increase compared to 2022). However, only 50% can afford out-of-pocket expenses that exceed $1,000. The survey also indicated that 48% of employees can’t survive without a paycheck for a month. Also, 30% of workers are in a worse financial position (compared to 2022).
What you can do
Not addressing burnout can reduce the quality of life for your staff and it could have downstream implications on your workforce — including diminished job satisfaction and work-life balance among those suffering from burnout, as well as a high chance they’ll be looking for new work.
To ensure employee satisfaction and retention, employers can provide mental health tools and resources. Here are a few tips that can help with employee satisfaction, retention and recruitment.
Improving work-life balance
Work-life balance perks — You can help workers maintain a balance between work and personal life. Dedicating an equal amount between the two eliminates burnout and stress. You can do this by offering:
Flexible work schedules. A flexible work schedule gives employees a sense of autonomy. Instead of the traditional 9-5, you can give them the freedom to choose specific hours they wish to work or allow them to work four 10-hour days, leaving one day for personal stuff.
More time off. One in three (33%) employees surveyed by Aflac ranked increased time off as their first choice for addressing burnout. More time off can be in the form of additional vacation time or “mental health” days.
Paid sick leave. Workers who have paid sick leave can take those days off when they really need to stay home and don’t feel obligated to go to work when sick just because they need the money.
Other ways to help
Provide an EAP — Employee assistance programs include free and confidential assessments, short-term counseling, referrals, and follow-up services to employees who have personal and/or work-related problems.
EAPs address a range of issues affecting mental and emotional well-being, such as alcohol and other substance abuse, stress, grief, family problems and psychological disorders.
Offer creative bonuses — Offer cash bonuses for exceptional work efforts. If you can’t afford to pay your employees cash bonuses, you can consider something like morning or afternoon off, vacation vouchers, gym memberships and free lunches, to name a few.
Encourage regular breaks — Many workers fail to take their breaks because they get too wrapped up in work, or out of fear they will look bad in front of their colleagues.
Provide supplemental insurance — Supplemental benefits include accident, critical illness, hospital indemnity, disability, cancer, life, vision and dental insurance. These are designed to complement medical insurance, particularly for workers with high deductibles or out-of-pocket expenses. Premiums for many of these benefits are quite affordable.
The IRS recently announced that the annual contribution limit for flexible spending accounts will rise to $3,200 in 2024, up $150 from this year.
Also, employees will be able to carry over up to $640 next year into 2025 if they have funds left over in their account, if their employer allows it (it’s optional). That’s up $30 from this year. Anything above the limit at the end of the year is forfeited back to the employer.
The FSA announcement came unusually late this year, right in the middle of open enrollment, making it difficult for employers and employees to plan.
Earlier in 2023, the IRS also announced the maximum contribution limits to health savings accounts, which are similar to FSAs, but they must be attached to a high-deductible health plan. The annual limits on HSA contributions in 2024 are $3,850 for individuals and $8,300 for families, both up more than 7% from 2023’s limits.
FSA fast facts
Funds in an FSA can be used for a myriad of health care expenses, from dental and vision (including eyeglasses) to medical care costs and prescription and over-the-counter pharmaceuticals.
An FSA must be funded exclusively through employer contributions or employee pre-tax contributions, or a combination of the two. Employees are not taxed on withdrawals from their account.
At the end of the year unused funds in an FSA are handled in one of three ways, based on how the employer designs the plan:
They are forfeited at the end of the plan year.
Up to $640 of the balance is rolled over to the next plan year. The employer can choose how much the employees can roll over, up to the limit. If there is a remaining balance beyond the $640, it is forfeited.
A grace period is allowed in the first few months of a new plan year to be paid with old plan year funds. Remaining balances are then forfeited.
The FSA caveat: Employees have access to the full annual FSA election amount at the beginning of the year, so there’s always a risk that they could use their FSA allotment and quit or be let go before they’ve fully funded the account through payroll contributions or after you funded it.
Just as employees risk forfeiting their money if they don’t spend it in time, employers risk this money if the employee leaves before their and your contributions have caught up to their reimbursements.
If you are caught in this situation, you are not allowed to withhold additional funds from the employee’s final paycheck to make up for those funds, and you are also barred from sending them a bill to recapture those funds.
Additional payroll contributions beyond the final paycheck can only be made if the employee elects to continue their FSA plan through COBRA.
As more Americans struggle with medical costs and rising out-of-pocket expenses, more employers are starting to offer deductible-free plans, according to a new report.
Mercer’s “2023-2024 Inside Employees’ Minds” survey results jibe with other reports that some insurers’ fastest growing group health plans carry no deductibles.
Workers covered by these plans often receive more preventive care than those who are in plans with deductibles, and they often pay up to 50% less out of pocket, UnitedHealthcare’s chief operating office, Dirk McMahon, told investors recently. He added that these plans can help their employers reduce the total cost of care by an average of 11%.
Employers understand the increasing financial burden that health insurance and out-of-pocket costs are imposing on some of their employees. Medical debt is a growing problem in the U.S.
Employers are taking a number of different approaches:
15% offer free employee-only coverage in at least one medical plan.
18% use salary-based contributions, meaning that employees who earn less also pay less for their coverage, while their higher-wage colleagues pay more.
39% offer at least one health plan with no or low deductible. These are often known as copay plans.
6% make larger contributions to the health savings accounts of their lower-wage staff.
Employers have several types of health plans to choose from when designing their benefits packages. Because attracting and retaining talented staff is a high priority for many organizations, they often look for the best health plan available.
One option that appeals to many employers is the no-deductible health plan. These plans are attractive because they cover health care costs immediately, eliminating high out-of-pocket expenses for employees. But, no-deducible health plans have high premiums, which may make them difficult for some employers to afford.
No-deductible plan trade-offs
No-deductible plans may:
Have higher premiums to account for the more generous benefit.
Feature higher copays.
Have limited network providers,
Have fewer covered health services.
Depending on your benefits budget and your workforce demographics, no-deductible health plans may be your best option for staff who are high health care users. There are a few issues you should consider when mulling offering such plans. Here are the main pros and cons:
Pros
These plans can reduce your workers’ out-of-pocket medical expenses.
The plans are well-suited for people who incur high medical expenses, like those with chronic conditions, who make frequent doctor’s visits and/or who are taking expensive prescription medications or have many prescriptions they regularly refill.
People who know how much they will pay upfront for care are more likely to access care when they need it, particularly for chronic conditions, and they are more likely to go to annual checkups.
There is less likelihood of receiving surprise medical bills.
Cons
These plans typically have higher monthly premiums.
Copay outlays can add up for high users of medical services.
Some plans may restrict eligible services and items, perhaps by not including certain drugs in their formularies or by offering a limited provider network.
The takeaway
While no-deductible plans will be attractive to many workers, they are not for everyone and their higher premium may dissuade many people from choosing them, even if you have a generous premium-sharing arrangement. If you agree to pay a set amount towards their insurance premium, these plans can still cost hundreds of dollars more a month for the employee.
People who do not use their health insurance much are not good candidates for these plans as well, since they may end up paying higher premiums for services they don’t use.
A new report has found that the top driver of health care costs in the U.S. is chronic conditions, emphasizing the role that employers can assume in helping their employees better maintain these ailments.
Chronic diseases are a major strain on the health care system, and they are costly to treat. Worse, many people with these ailments do not manage them well and do not change their lifestyles to improve them.
According to the Centers for Disease Control, six out of every 10 American adults have at least one chronic condition, with 40% having two or more.
As a result, chronic conditions play an outsized role in the cost of group health insurance. In order to contain costs and improve outcomes for their workers, employers can employ a number of different strategies, according to the report by the International Foundation of Employee Benefit Plans.
The CDC defines chronic disease as a condition that lasts at least a year and affects or limits daily activities or requires regular medical attention. The seven most common conditions are:
Heart disease
Cancer
Chronic lung disease
Stroke
Alzheimer’s
Diabetes
Chronic kidney disease.
While there is no one-size-fits-all solution, employers can try to contain costs, and hopefully their insurance premiums, by implementing a few strategies.
Disease management
Depending on the condition, chronic disease management programs will vary and it is usually a multi-pronged approach involving the plan enrollee’s health care provider and employer programs. Disease management should include:
Regular screenings and checkups.
Structured treatment plans.
Education on how to manage their disease and self-care strategies. Some programs help enrollees to set goals for their health.
Promoting the benefits of regular exercise and a nutritious diet, and empowering enrollees to take control of their health.
Integrating wellness programs focused on chronic disease management and that promote a healthy lifestyle.
Empowering enrollees to take control of their health.
Coordinated care
It’s important for people with chronic conditions to receive care that’s coordinated among different providers. This is crucial as these diseases can have multiple effects, requiring the involvement of more than one physician with different specialties.
The key is that providers have in place systems and procedures that ensure that the patient’s various physicians are sharing information with one another, and that the patient is kept in the loop. This care requires:
Access to care from different health care providers,
Coordination between primary care, acute care and long-term care,
Strong communications among providers, and
Easily understandable patient communications.
Employee engagement and education
You as an employer can also do your part by making sure employees with chronic diseases make choices that ensure access to providers that focus on coordinated care.
You can also offer wellness programs that give employees with chronic diseases access to care coordination, medication management, disease-specific education, self-monitoring tools and peer support. For example, an employee wellness program may provide employees with diabetes with glucose meters, insulin pumps, diabetes educators and online support groups.
Employee wellness programs can help employees adopt healthier behaviors and lifestyles by providing them with information, motivation, support and resources. For example, an employee wellness program may offer free or discounted gym memberships, healthy food options, wellness challenges and rewards for reaching health goals.
Take advantage of essential services
To keep their disease from worsening or to identify possible health issues that may be developing, it’s vital that plan enrollees take advantage of preventive services that the Affordable Care Act requires be offered with no out-of-pocket costs:
Screenings and counseling.
Routine immunizations.
Preventive services for men and women.
Even when a member does not receive preventive care and develops a chronic disease, preventive measures can ensure that the disease remains in a low-severity stage.
The takeaway
The key for employers is outreach, particularly in the run-up to and during open enrollment. You can take additional steps to ensure workers with chronic disease are engaged and that they are educated in choosing plans that may offer them the best care for their condition.
Furthermore, you can offer wellness plans that reward healthy behavior, and you can educate your workers about their health coverage and the importance of getting regular screenings and inoculations.
