Balancing health-plan costs and quality
Balance: that’s been the annual challenge facing U.S. employers that provide health plans to more than 150 million people each year.
“For employers, it’s not just about cutting costs,” says Rabah Kamal, senior policy analyst at the nonpartisan, nonprofit Kaiser Family Foundation, which has tracked health-plan trends through an annual employee-benefits survey for the last two decades. “It’s also about balancing potential cost savings and workers’ coverage needs because health insurance is a really valuable benefit when it comes to attracting and retaining workers.”
In April, Kamal will present results of the 2019 KFF survey at HRE’s Health & Benefits Leadership Conference in Las Vegas. The “Employer Strategies to Reduce Health Costs and Improve Quality” session will detail nationwide findings about employer health-plan costs and designs, long-term trends and insights gleaned from focus groups that included, among other employers, last year’s HBLC attendees.
HRE: What trends have you uncovered through the 2019 survey and its predecessors?
Kamal: Employers have been largely responsible for grappling with how to choose and pay for health coverage for a good chunk of the population, and we’ve seen that [their] overarching concern is the question of how to cut down on costs of coverage while also offering their employees a choice of quality providers and services.
Over time, we’ve seen that there’s been pretty remarkable stability in the employer market overall. Premium growth has been slow and steady, and offerings and coverage rates have been relatively stable over time. In particular, we’ve had quite a few years now of fairly low premium increases.
HRE: Anything surprising?
Kamal: It’s also important to note that premium increases still can consistently exceed both inflation and wage growth. Even though premium growth has been relatively steady, premiums have definitely increased.
For 2019, we see that the average total premium for single coverage is now $7,200 per year, and the average family premium just passed $20,000 a year, which is a milestone. The breakdown of that is a $14,561 employer contribution and about $6,000 for the family’s contribution. These are pretty hefty numbers we’re talking about; $20,000 is a pretty big deal and we could say it’s a milestone, but not necessarily a good one.
HRE: With many employees saying they’re concerned about the cost of healthcare, what additional factors impact this increase in cost trend?
Kamal: When looking at these healthcare costs, it’s also important to look at what’s happening with wages. Over the last 10 years, workers’ contributions to premiums grew 71%, while wages grew 26%. That’s a pretty stark difference. To speak to cost sharing in particular, during the past 10 years, average deductibles have gone up 126% for single coverage. That’s a major reason people are understandably upset and concerned about their healthcare costs.
We hear about private insurance as if it’s a sort of monolith, especially lately in discussions of potential health-system reforms. And something this survey has always shed light on is that it’s not that simple a picture. For those more than 150 million people covered through an employer, there’s a real spectrum, from having good coverage to pretty lousy coverage.
There’s also a split between the experience of workers at low- and higher-wage firms. It’s almost as if they’re living with different insurance systems. Low-wage workers are much less likely to have coverage and, on average, they pay $1,100 more in deductibles for single coverage and contribute $7,000 out of their paychecks for family coverage, which is most definitely unaffordable when someone’s making, more or less, $25,000 a year.
The survey really underscores that the issue with healthcare for most Americans is affordability. It also sheds light on what employers are facing when it comes to leveraging their buying power to try to address that concern.
HRE: How can employers navigate all this?
Kamal: We found that employers face multiple barriers when it comes to exercising control over their provider networks and balancing cost containment with employee satisfaction. [For example,] there’s considerable interest in how payers can use their purchasing power to improve quality and reduce cost in the healthcare system. By negotiating prices and establishing quality standard with providers participating in their network, the idea is that employers can attempt to influence the cost and quality of care.
That might seem like an appealing strategy for employers—particularly, large firms with significant buying power—but many companies haven’t used the leverage of network participation in an aggressive way. Networks can mitigate cost growth but it turns out that there are challenges to developing and promoting those strategies. For example, one major concern for employers is that tighter networks may limit the choice of hospitals and doctors for their enrollees and potentially expose their employees to out-of-network charges, which are often unaffordable.
HRE: Can you give any other details about your presentation?
Kamal: I will be including an overview of the strategies employers are implementing or are not able to implement and give some insight into the successes, the barriers and the trade-offs, and experience in their network decision-making. I’ll also be touching on the implications of our findings in the context of ongoing efforts to reduce healthcare costs and improve quality. Since [participants] essentially represent most firms in the U.S., it means that the survey really gives a sense of what most employers are actually doing, so people can trust these findings in their decision-making.
Rabah Kamal will speak April 15 at the Health & Benefits Leadership Conference. For more information or to register, click HERE.