How do you find good health insurance for your employees? It’s a tough question, with answers that never seem to get easier. The challenge is especially acute for businesses with too few people to bargain effectively with insurance carriers.
“Affordability continues to be a challenge for smaller employers,” said Michael Thompson, President and CEO of The National Alliance of Healthcare Purchaser Coalitions, Washington, D.C. “They are looking for any solution that can help them sustain affordable coverage.”
The latest figures show the extent of the problem. The average family premium for employer-provided health insurance hit $20,576 in 2019, according a new survey from the Kaiser Family Foundation. That represents a rise of 5% from the previous year, a pace far greater than the 3.4% wage hike and 2.0% inflation clocked for the same time period.
Employers searching for the right coverage find themselves navigating a confusing and shifting terrain. Making the picture murkier are recent challenges to the Affordable Care Act (ACA), the federal legislation passed in 2010 to solve the health insurance conundrum.
While the legality of the ACA is currently under review by a federal appeals court, it remains the law of the land. It requires businesses with 50 or more full-time equivalent employees (FTEs) to offer health insurance with mandated levels of coverage.
“If you do not provide coverage you will be charged a penalty,” said Julie Stich, Associate Vice President of Content at the International Foundation of Employee Benefit Plans (IFEBP), Brookfield, Wis. “And the IRS has already started sending penalty letters.”
While employers with fewer than 50 FTEs are not required to offer any coverage, they may decide to do so to retain their competitive position as employers of choice for top performing workers.
Rising health care costs, of course, can erode the bottom line. Employers are stemming the tide by asking employees to shoulder more of the premiums. “Today’s employees experience a significant dent in their take-home pay as a result of health insurance premiums,” said Drew Altman, President and CEO of Kaiser. “Their cost sharing has been rising much faster than their wages.”
Of the total premiums of $20,576 for family coverage in 2019, employees picked up an average of 30%, according to the Kaiser survey. They also must share the costs incurred when utilizing medical services. The average annual deductible for single coverage was $1,655 in 2019. That represents an increase of 36% over the past five years and 100% over the past decade. “Over 26% of workers have deductibles of at least $2,000 a year, with higher ones more common at small firms,” said Kaiser researcher Matthew Ray.
In addition to deductibles, employees must usually pay a portion of the costs incurred when they visit in-network physicians. The most common arrangement is a copayment (a fixed dollar amount) for visiting a doctor, although some companies have requirements for coinsurance (a percentage of the covered amount). In 2019, the average copayments were $25 for primary care and $40 for specialty care. The average coinsurance rates were 18% for primary care and 19% for specialty care. These amounts were similar to those in 2018.
Finding a plan
As the above numbers suggest, employers are tackling high health insurance costs by utilizing various forms of cost sharing. They are also considering less costly options promoted by the Trump administration. These include short-term policies, association health plans, and more flexible health reimbursement arrangements (HRAs).
Employers with tight budgets may be especially attracted to the short-term plans that sport monthly premiums as low as $200. However, the fine print of such plans often calls for higher out-of-pocket maximums, less comprehensive coverage and lower benefits ceilings.
“Bear in mind that a majority of such plans does not cover wellness visits, prescriptions, mental health and maternity,” said Jessica Du Bois, an insurance broker in the Washington, D.C., region. A lack of prescription drug coverage can be especially damaging, since drug prices are rising much faster than other health care components.
The U.S. Department of Labor is issuing regulations to expand the availability of association plans, another option geared for the needs of smaller employers.
“Association plans let employers pool within similar geographic locations or industries,” says Du Bois. “Spreading the risk over more people generally results in a lowering of premiums.”
One problem with association plans is that businesses with healthy individuals may end up subsidizing the steep medical bills of others.
Still, they can be a viable path for healthcare coverage. The NTCA, for instance, offers its 1,600 members a discounted program for health, life, dental, vision, supplemental plans and more through Campbell Petrie, together with BENAdvance. NTCA members and eligible family members have access to a turnkey, blue-chip benefits package at affordable, group-discounted rates.
Campbell Petrie stated, “Our sole mission is to help our clients attain the best possible employee benefit products that balance features and budget so employers can stay competitive in their industry by attracting top talent, and so employees receive the package they deserve.”
The convenient web-based BEN portal enables NTCA members to shop for benefits at work or home 24/7, get product information and rates, complete applications, obtain binding coverage, access ID cards, make payments and more.
The unique feature of this plan is that each member or group applying is evaluated individually, not grouped together with other members who may have a history of high medical expenses.
NTCA Executive Director Bart Bettiga said, “If you have a good record, you will not be penalized, and can get great rates for health insurance. This is especially useful for individuals or a small shop under five people looking for health insurance. And it offers a good selection of disability benefits, or supplemental programs and lifestyle products for larger companies. Rates are much better than what could be obtained on the open exchange.”
The positive user experience continues after purchase with A-rated carriers such as Cigna, MetLife and Chubb, providing excellent customer service.
For information on the NTCA-sponsored plan, talk with NTCA assistant executive director Jim Olson at 601.942.2996 or email [email protected]
For more information about the pros and cons of short term plans association plans, visit https://www.dol.gov/general/topic/association-health-plans.
Health reimbursement arrangements
Finally, employers are taking a look at another option being promoted by the Trump administration. Health Reimbursement Arrangements (HRAs) are tax-sheltered accounts from which funds are withdrawn to reimburse employees for health care received on the open market.
“Some employers use HRAs to self-insure a small portion of their healthcare,” says Du Bois. “They increase their deductibles to save on premiums, then give employees HRA funds to supplement a portion, or all of the deductible.”
Despite all these changes in the health insurance environment, the quest for affordability is not likely to end any time soon. “Health care is expensive for most employers,” said Drew Altman, president and CEO of Kaiser. “Finding the right insurance remains an ongoing, chronic headache.”