Q&A talks about the upcoming health insurance open enrollment period with Silas M. Warner, client executive and vice president of Willis of Connecticut, a unit of Willis Group Holdings, a global risk advisor, insurance and reinsurance broker.
Q: Premiums for health plans sold through Connecticut’s individual market are, on average, expected to decrease next year or rise slightly. Will the same be true for employer health plans in Connecticut, or are they more likely to see higher rate increases?
A: Group medical costs for employers continue to rise driven largely by a combination of trend and compliance costs. Our current data suggests insurance carriers are consistently using 10-11 percent increases in their renewal calculations for medical trend and 12-14 percent for pharmacy costs. Some factors driving cost increases include an aging workforce, the increasing prevalence of chronic disease and the increased cost and utilization of specialty medications.
These drivers, combined with the taxes embedded in the Patient Protection and Affordable Care Act and coverage mandates that continue to be added to the plans, unfortunately mean that employer-sponsored plans are consistently experiencing trend figures that are higher than we would all hope for.
Q: Are there any new trends coming down the pipeline with employee wellness programs? Would you say their use is on the rise or decline?
A: Wellness programs — workplace initiatives that promote a healthy lifestyle — continue to gain traction among organizations as employers work to combat rising healthcare costs. While the components of wellness programs can vary dramatically based on organizational goals, we are beginning to see employers turning to targeted strategies and intervention programs that directly influence employees’ individual behaviors and health habits.
Employers are more engaged than ever in understanding what they can do to reduce medical costs and improve workforce productivity. What is changing, however, is that there is a greater appetite for “return on investment” with an equal level of emerging skepticism around traditional worksite wellness delivery.
Much of the attention recently in wellness has been around technology — largely around innovations in wearable devices and self-monitoring apps. These hold considerable promise for a subset of the working population. The real return on investment will increasingly come through targeting higher risk and even higher medical cost individuals to deliver a higher level of touch where it is needed most. Programs that can effectively provide risk stratification and targeted results are rising to the top of a crowded field.
Q: Are there any other major trends employers should look out for during the upcoming open enrollment season?
A: In the Willis Healthcare Reform survey that was released earlier this year, respondents overwhelmingly noted a ‘wait and see’ approach and a commitment to continuing to offer employer-sponsored health plans as part of a total rewards package.
Whether it is a small business needing more time to see how the public exchange model may become a viable option for them or a larger employer evaluating the pros and cons of a private exchange platform, many middle market employers are not making massive overhauls at this time. Employers are now tabled with additional administrative burdens such as measuring part-time employees to determine if they now qualify for medical coverage, or calculating the affordability portion of healthcare reform to avoid a potential penalty.
However, cost shifting is one area that employers continue to tweak. For example, some organizations are increasing, or plan to increase, dependent coverage contributions at a higher rate than employee-only coverage. Some organizations have added surcharges or eliminated coverage for spouses if they have coverage through their own employer.
Q: What are the major factors that will be impacting employer health insurance rates in 2015? Are there any new Affordable Care Act policies that will be kicking in?
A: While originally scheduled to begin in 2014, the employer mandate was delayed until 2015. This coming year will represent the first time employers will face a penalty from the federal government for failing to offer affordable health insurance to their employees.
The penalty does not apply to small companies (under 50 employees). Unlike prior years, where the expense to employers had been the result of new federal mandates (like prohibiting pre-existing condition exclusions, annual and lifetime dollar limits, or requiring certain types of coverage to be included in medical plans), the expense in 2015 will also come from potentially offering to cover more people.
Many employers are preparing to extend coverage to employees that may not have been offered medical insurance in the past, including full-time temporary or seasonal employees, interns and part-timers that work 30 or more hours per week. For some industries, it can be far more expensive to expand eligibility for benefits to an additional percentage of the workforce than it is to make the plan more comprehensive.
Other factors impacting 2015 rates include new taxes levied on insurers and other companies that provide products covered by medical insurance (medical devices, pharmaceuticals, etc.). Further distance from the economic recession has also appeared to contribute to more utilization of medical services, which provides further pressure on rates to increase. Additional market changes, like more individuals being covered by lower-reimbursing government plans and the consolidation of providers/hospitals, can also contribute to increased costs for insurance companies that are passed along to employers in rate increases.n
