Employers Expect Higher Premiums, Little to No Cost-Shifting

Employers Expect Higher Premiums, Little to No Cost-Shifting

Employers who were surveyed for a new report expected that group health insurance premiums would increase 5.4% this year and at a faster clip in 2024 as inflation hits medical costs.

Employers said they are looking to manage growing group benefit costs without shifting costs to employees, as they realize that their staff are likely dealing with inflation in all facets of their lives, including their medical bills, according to Mercer’s “Survey on Health and Benefit Strategies for 2024.”

At the same time the labor market is still very tight, requiring businesses to continue offering attractive pay and benefit packages.

In fact, 64% of large employers (with 500 or more workers) plan to enhance their health insurance and well-being benefits to stay competitive for talent and to keep their staff happy, Mercer found.

With all that in mind, the report advises that employers will have to prepare for higher premium outlays and be creative in how they try to control costs.

“Employers looking to enhance benefits will need to do it carefully — not by adding bells and whistles, but by looking for opportunities to add value,” Mercer wrote in its report.

“That might mean filling gaps in current offerings with more inclusive benefits. It might mean revisiting time-off policies to give employees more flexibility. It definitely means paying close attention when employees say they need better support for their mental health.”

Whether to pass on higher costs

Besides the 64% of employers who said they would boost their benefits in 2024, 28% said they would not but have done so in the past two years. When asked if they would pass on the additional health insurance costs to their employees:

  • 45% said they would not shift any of the higher costs to employees.
  • 24% said they would up employee cost-sharing, but by less than the projected increase.
  • 27% said they would raise cost-sharing enough to keep pace with the projected cost increase.
  • 3% said they would raise cost-sharing enough to reduce the projected cost increase.

Employers are also taking different steps to make health insurance more affordable for their staff, particularly those at the lower end of the wage spectrum:

  • 15% of employers offer free employee-only coverage in at least one plan.
  • 18% use salary-based contributions to premiums, with lower-wage workers paying less than their better paid colleagues.
  • 39% offer a medical plan with no or a low deductible or cost-sharing (e.g., copay plan).
  • 6% make larger health savings account contributions to lower-wage staff to make their high-deductible health plan more affordable.

Other strategies

Besides those steps, employers are using a number of other strategies to slow health

cost growth without shifting cost to employees, including:

  • Programs aimed at enhancing the management of specific health conditions like diabetes and heart disease. Programs also include pain management, which can reduce medical costs and improve patient outcomes.
  • Focused actions to manage the cost of specialty prescription drugs. Strategies include making plan design changes to steer patients to specialty pharmacies, focusing on the site of care and seeking support from drugmakers to reduce enrollee out-of-pocket costs and demanding integrated managed care from health plans and the pharmacy benefit managers with which they contract.
  • Increasing virtual care offerings, beyond standard telemedicine. Already 64% of employers offer virtual programs for a broader range of care, such as behavioral health care, specific care areas like diabetes or musculoskeletal issues, specialty care like dermatology or reproductive care and primary care.
  • Steering enrollees to quality, high-value care via high-performance networks, centers of excellence, etc. These approaches deliver savings by focusing on the quality and efficiency of a provider network.
  • Limiting plan coverage to in-network care only (in at least one plan).
  • Strategies focused on utilization of high-quality primary care (e.g., advanced primary care).

The takeaway

As we enter a period of higher premium increases along with a competitive job market for employers, businesses will need to be creative when addressing costs and offering the benefits that their employees desire.

The three main takeaways from the Mercer report are:

  • Be prepared for faster premium increases in the coming years.
  • Find benefits that will add value for your employees, and not bells and whistles they don’t care about.
  • Consider network and telehealth strategies to help reduce overall costs.
More Insurers Pushing Virtual Care for Cost Savings

More Insurers Pushing Virtual Care for Cost Savings

More and more insurers are expanding the use of telemedicine, just as a new study shows promising cost savings of up to 25% from virtual care when implemented properly.

The latest insurer to announce an expansion of its telemedicine offerings is UnitedHealthcare, which recently said it would eliminate out-of-pocket costs for its 24/7 Virtual Visits program for eligible members enrolled in fully insured employer-sponsored plans, starting July 1.

Besides making care more convenient and reducing costs for its enrollees, the insurer is hoping more access to virtual care will encourage earlier visits, which can reduce the risk of complications or need for emergency care later on.

Other insurers have also been working with their network providers to increase the use of telemedicine in the hopes of making care more accessible for patients and reducing overall costs.

And as more providers, patients and insurers gain an understanding of the breadth of services that can be handled via telemedicine, and the limits, patients will likely make more use of telemedicine.

This is good news for patients and employers, who may end up benefiting from lower plan costs, as well as lower out-of-pocket expenses for employees.

Most large health carriers have adopted some form of telemedicine by either contracting with a tech provider to manage the interface or by purchasing a tech platform.

As well, a growing number of established insurers are starting to sell “virtual-first” plans, often with a zero-dollar deductible and no copays for all visits with virtual-only providers.

Potential savings and other benefits

In a study published in the American Journal of Managed Care, researchers at the Perelman School of Medicine at the University of Pennsylvania found that average per-visit costs for hospitals in Penn Medicine’s OnDemand telemedicine program were 23% less than for in-person visits.

Average per-visit costs in the telemedicine program were $380, compared to $439 for in-person primary care offices, emergency departments or urgent care clinics costs.

“The conditions most often handled by OnDemand are low acuity — non-urgent or semi-urgent issues like respiratory infections, sinus infections, and allergies — but incredibly common, so any kind of cost reduction can make a huge difference for controlling employee benefit costs,” the study’s lead researcher, Krisda Chaiyachati, MD, said in a press release.

The study’s authors noted that there are other benefits besides just cost savings.

The program made care easier, which the study’s senior author, David Asch, professor of Medicine, said promotes more care. Since telemedicine is so convenient, people “who might otherwise have let that sore throat go without a check-up may seek one when it’s just a phone call away,” he explained.

Telemedicine services expanding

Before the COVID-19 pandemic uptake of telemedicine had been slow, but usage increased dramatically when hospitals closed to all but emergency cases and as many people were afraid to see their doctors in a health care setting in fear of contracting the disease.

Additionally, Congress in March 2020 enacted legislation that expanded telehealth access for Medicare beneficiaries, leading to a rapid uptake of virtual care.

All that uptake has forever changed perspectives on medical care delivery and the number of visits that can be handled via telemedicine is growing. Initially, hospitals were using it for primary care visits. While that is still the main type of visit for which patients are using telemedicine, uses are expanding to include:

  • Urgent care,
  • Therapy for behavioral health care visits,
  • Specialty care, like dermatology,
  • Chronic conditions management, and
  • Wellness screenings.

As this technology matures, the number of services that can be handled via video or phone will continue to increase.

Virtual-only plans legislation

Waivers created by the March 2020 CARES Act, an economic rescue package in response to the pandemic, have allowed individuals to choose and buy the use of telehealth services outside of their high-deductible health plan without affecting their health savings account eligibility. Last year, the wavier was extended by legislation through Dec. 31, 2024.

Bipartisan legislation in Congress, the Telehealth Benefit Expansion for Workers Act, would make these waivers permanent and allow employers to offer stand-alone plans to their workers.

It’s envisioned that these stand-alone telehealth benefits would operate similarly to dental and vision benefits, remaining separate from health care plans. They would be another tool for reducing overall medical costs.

According to the bill’s authors, allowing employers to offer stand-alone telehealth coverage would:

  • Help alleviate provider shortages,
  • Increase access to mental health services,
  • Reduce the cost of care for patients by widening provider networks, and
  • Provide timely access to medical care to individuals in rural areas.

The bill also would include telehealth access for part-time, seasonal and contracted workers.

ACA Employer Mandate Penalties on the Rise

ACA Employer Mandate Penalties on the Rise

The penalties for not offering health insurance to your employees if you have 50 or more full-time or full-time equivalent employees in violation of the Affordable Care Act are set to rise again next year.

The IRS has increased the fines for employers that fail to provide health insurance for their workers under the ACA’s employer mandate, as well as for failing to provide coverage that is affordable or coverage that provides “minimum value.” The penalties will apply to plans that start on or after Jan. 1, 2024.

The way most employers find out that they may have violated the employer mandate is if they get a 226-J letter from the IRS, which would be prompted by one of your employees receiving premium subsidies after purchasing coverage on a government-run exchange.

Under the mandate, employers with 50 or more full-time or full-time equivalent workers are required to offer 95% of them affordable health coverage. There are two different penalties for violations:

The A penalty

This is levied on an applicable large employer (ALE) for failing to offer minimum essential coverage to 95% of full-time employees and their dependents and if just one of those employees receives a subsidy when they buy insurance on a government-run ACA marketplace.

New penalty amount:  $2,970 per employee, up $90 from 2023.

This penalty can be especially damaging. While it is not assessed for the first 30 employees if triggered, it applies to all of the employer’s full-time employees, meaning costs can quickly add up.

The B penalty

This fine is levied if an applicable large employer fails to offer coverage that is affordable and/or fails to provide minimum value, and just one full-time employee receives subsidized coverage through the marketplace.

Coverage is deemed unaffordable if an employer fails to offer at least one self-only health plan where any employee’s share of the premium does not exceed 9.12 % (the 2023 threshold) of their household income. The affordability threshold has not yet been announced for 2024.

In order to provide minimum value, an employer-sponsored plan must cover at least 60% of average costs and provide substantial coverage for inpatient and physician services.

New penalty amount: The annual penalty for a type B infraction rises to $4,460 per employee in 2024, up $140 from this year. Typically, this penalty is broken down into monthly increments depending on how long an employee receives subsidized coverage on an exchange.

The takeaway

While you no doubt already offer coverage to your employees if you’re an ALE, it’s important to pay attention to next year’s affordability threshold.

Any downward change means you have to recheck to ensure that at least one of your plans offers coverage deemed affordable to your lowest-paid employee.

Also, be especially mindful during the new-employee onboarding process to ensure they are properly identified and offered coverage.

If the IRS suspects you are out of compliance, it will send you a 226-J letter. You’ll be glad you have all your paperwork in order if you receive one of these letters.

The 226-J letters are also sent to employers if they make mistakes on their Form 1095-C.

If you receive one of these letters, contact us for assistance.

Insulin Makers Cap Prices for Insured Individuals

Insulin Makers Cap Prices for Insured Individuals

Three drugmakers, which account for roughly 90% of the insulin in the U.S. market, in March 2023 announced that they will cap the cost of insulin for people with private insurance plans.

That includes those on employer-sponsored group health plans and plans purchased on a government-run exchange. The changes mean some or many of your employees will see significant reductions in their pharmaceutical outlays, particularly if they have high copays or deductibles.

The moves come after the Inflation Reduction Act, signed into law in 2022, capped out-of-pocket insulin costs for seniors on Medicare at $35 per month. However, the law does not apply to people younger than 65 who also need insulin.

According to the Centers for Disease Control and Prevention, an estimated 28.7 million people — or 28.5% of the population — were living with diagnosed diabetes in 2022, and chances are high that most employers have workers with the condition. Out of that population, 8.4 million use insulin, according to the American Diabetes Association.

Eli Lilly was the first company to announce, on March 1, that it would cap the cost of all its insulin products at $35 per month, with immediate effect.

On March 14, Denmark-based Novo Nordisk announced that it would lower the U.S. list price of some of its insulin products by up to 75%, putting the fast-acting insulins NovoLog and NovoLog Mix 70/30 at $72.34 for a single vial and $139.71 for a pen. The new pricing will take effect Jan. 1, 2024.

Finally, Sanofi two days later announced that it would cap the out-of-pocket cost of its most popular insulin, Lantus, at $35 per month for people with private insurance. This change also takes effect Jan. 1, 2024.

These changes will bring relief to millions of Americans, particularly after years of insulin makers jacking up their prices. A report on National Public Radio in 2022 noted that the cost of insulin had increased 600% in the past 20 years.

Another report found that some people with high-deductible health plans were paying $350 to $600 a month, for a medicine that costs $6 to make.

Next steps

There are moves afoot to force the industry to cap the price at $35 a month. Legislation has been introduced in Congress that would force drugmakers to cap their insulin price at that level.

You may want to circulate this news with your employees, so they are aware of the new pricing. A 2022 analysis by the Kaiser Family Foundation found that most people on private health insurance would benefit:

  • In the individual market, the median cost health plan enrollees pay for insulin is $62 per month. One-quarter of them pay $105 a month.
  • In the small group market, the median cost health plan enrollees pay is $54 per month, while one-quarter pay $83.
  • In the large group market, the median cost health plan enrollees pay is $54 per month, and one-quarter pay $77.
New Anti-Obesity Drugs Put Employers in a Quandary

New Anti-Obesity Drugs Put Employers in a Quandary

A surge in demand for pricey, new and highly effective anti-obesity medications could put a financial strain on employers who sponsor their employees’ health plans.

Employers have long offered coverage for certain weight loss tools, such as bariatric surgery if employees qualify for the drastic procedure that requires an operation. Other medications that have been on the market for some time have limited effect, don’t work for everyone and can have serious complications.

But a new class of drugs that has hit the market in the last few years has proven extremely effective in helping people lose weight. As a result, pharmaceuticals like Novo Nordisk’s weight-loss-specific Wegovy and Saxenda, and Ozempic — a diabetes medication from the same company — are now in high demand.

There’s one big catch: These drugs are very costly, putting employers in a quandary. They want to attract and retain high-quality talent, but they don’t want to break the bank on their employee benefits offerings.

A recent survey by the Obesity Action Coalition found that 44% of people with obesity would switch jobs if it meant gaining access to obesity treatment coverage. Likewise, 51% would stay in a job they didn’t like to have access to the coverage.

These findings are significant considering how much these drugs cost and the fact that once someone starts taking them, if they stop, they will usually start gaining weight immediately.

What are these drugs?

This class of pharmaceuticals, known as glucagon-like peptide agonists (GLP-1s), have shown to be highly effective in helping people lose excess weight.

Since news spread of how effective they are, demand for these medications has skyrocketed.

Just three years ago, few people had heard of these drugs and they were not often prescribed, but that’s all changed.

For example semaglutide, which is known under the brand names of Ozempic, Wegovy and Rybelsus, was the fourth-most prescribed drug in terms of total costs in 2021 at $10.7 billion, an increase of 90% from the year prior, according to a report in the American Journal of Health-System Pharmacy.

While many of these drugs are injectable, some like Rybelsus come in pill form.

Shocking costs

Experts warn that if more workers seek out these drugs, payer outlays will spike, resulting in higher group health plan premiums for employers.

The list price of Wegovy is $1,350 per package, which breaks down to about $270 per week — or $16,190 per year.

That said, obesity has its own significant costs and proponents of these medications point at the potential for reduced costs on the back end if people lose weight and keep it off.

Medical costs of obesity in the U.S. were $173 billion in 2019, according to the Centers for Disease Control.

An unsustainable trend

It’s estimated that about 60% of large employers’ health plans cover one of these drugs, although with restrictions, including minimum body mass index (BMI) requirements and prior authorization.

Health plans may require enrollees who qualify for obesity care to first use other lower-priced anti-obesity drugs before they move to a GLP.

The American Gastroenterology Association recommends weight loss drugs for anyone who has a BMI over 30, or 27 if they have other medical complications, such as heart disease or diabetes. According to the CDC, 42% of Americans have a BMI over 30, which is considered clinically obese.

As the uptake of these drugs increases, employers and their health plans will need to make painful choices of to what extent the medications should be covered. Insurers are already considering ways to ensure that people who will most benefit from these drugs have access to them.

2024 HSA Contribution Limits, HDHP Minimums, Maximums Set

2024 HSA Contribution Limits, HDHP Minimums, Maximums Set

The IRS has raised the maximum amount people can funnel into their health savings accounts by 7.8% for 2024, the largest increase ever, brought to you by inflation.

The IRS updates this amount annually, along with minimum deductibles as well as the out-of-pocket maximums for high-deductible health plans. Under its rules, HSAs, which help employees save for medical expenses, are only available to those enrolled in qualified HDHPs.

Here are the changes coming in 2024:

HSA annual contribution limit

  • Self-only plan: $4,150, up 7.8% from $3,850 in 2023
  • Family plan: $8,300, up 7% from $7,750 in 2023
  • Catch-up contribution (for those aged 55 and older): $1,000 (unchanged)

HDHP minimum annual deductible

  • Individual plan: $1,600, up from $1,500 in 2023
  • Family plan: $3,200, up from $3,000 in 2023

HDHP annual out-of-pocket maximum

  • Individual plan: $8,050, up from $7,500 in 2023
  • Family plan: $16,100, up from $15,000 in 2023

The many benefits of HSAs

An HSA is a special bank account for your’ eligible health care costs. You can put money into your HSA through pre-tax payroll deductions, deposits or transfers. As the amount grows over time, you can continue to save it or spend it on eligible medical and medical-related expenses.

Funds in an HSA roll over from year to year and can earn interest. Many plans also have investment options for the funds to help savers further grow the account.

There are a number of benefits for employees who have an HSA:

  • The money you contribute to an HSA is not subject to income taxes, which reduces your overall taxable income.
  • You are not taxed on withdrawals.
  • If you contribute to their HSA with after-tax money, they can deduct your contributions during tax time on Form 1040.
  • You can tap the funds for any approved out-of-pocket medical expenses.
  • You can also grow the account tax-free by investing the funds in the account, sort of like a nest egg for medical expenses in retirement. (That said, 62% of account holders spend the money on year-to-year or near-term expenses, according to a report by the Employee Benefit Research Institute.)

HSA-eligible expenses:

  • Payments for services or medicine that go towards health plan deductibles, copayments or coinsurance.
  • Dental or vision care (including orthodontics, eye exams, corrective lenses),
  • Medical devices.
  • Certain over-the-counter medicines, like pain relievers, allergy medication, cold and flu medicine, and menstrual products.
  • Vitamins and health supplements, if recommended by a medical or health professional for the treatment or prevention of a specific disease or condition.