With the federal government shutdown and debt-ceiling fight settled at least temporarily, attention is being turned back to the near-term outlook for healthcare costs in the U.S. – costs trucking firms already say they plan to keep a close eye uponin the years ahead.
Leaving the less-than-stellar rolloutof ObamaCare aside for the moment, a recent survey indicates that healthcare costs are projected to continue climbing for individuals and businesses alike into 2014. And though increases in healthcare premiums are dubbed “the lowest in a decade” they are still going up and remain poised to continue in that direction for the foreseeable future.
"There are many factors that contributed to the lower rate of premium increases we saw over the past two years that we don't expect to continue in the long-term,” Tim Nimmer, chief health care actuary at Aon Hewitt; the firm whose research we’ll be reviewing below.
“These include the lagged effect from the economic recession on health care spending and continued adjustments as employers and insurers phase out the conservatism that was reflected in earlier premiums due to uncertainty around economic conditions and health care reform,” he said.
“Additionally, employers and insurers will now be subject to new transitional reinsurance fees and health insurance industry fees," Nimmer added. "While we are seeing pockets of promising innovation in the health care industry, we expect to see 2014 premium increases shift back towards the 6% to 7% range overall."
Aon Hewitt's data backing all of this up, by the way, is derived from its Aon Hewitt Health Value Initiative database, which captures health care cost and benefit data for 516 large U.S. employers representing 12.8 million participants, more than 1,200 plans and about $61.2 billion in health care spending for this year alone.
With that in mind, here are the firm’s most recent findings where health care costs are concerned:
After plan design changes and vendor negotiations, the average health care premium rate increase for large employers in 2013 hit 3.3%, down from 4.9% in 2012 and 8.5% in 2011 – the lowest premium increase in more than a decade. Yet, as noted above, in 2014 that’s expected to change with average health care premium increases projected to move back to the 6% to 7% range.
On average, Aon Hewitt forecasts that companies will see 2014 cost increases of 7.5% for health maintenance organization (HMOs) plans, 6.5% for preferred provider organization (PPOs) plans and 6.5% for point-of-service (POS) plans. That means that from 2013 to 2014, the average cost per person for major companies is estimated to increase from $10,880 to $11,696 for HMOs, $10,222 to $10,887 for PPOs and $11,450 to $12,194 for POS plans.
Aon Hewitt's analysis showed the average health care cost per employee reached $10,471 in 2013, up from $10,131 in 2012. The portion of the total health care premium that employees were asked to contribute toward this premium cost was $2,303 in 2013, compared to $2,200 in 2012. Meanwhile, average employee out-of-pocket costs, such as copayments, coinsurance and deductibles, increased 12.8% ($2,239) in 2013, compared to just 6.2% in 2012 ($1,984).
For 2014, average health care costs are projected to increase to $11,176 per employee, with employees expected to contribute 22.4% of the total health care premium, which equates to $2,499 for 2014. Average employee out-of-pocket costs are expected to increase to $2,470.
Those projections mean that over the last decade, employees' share of health care costs—including employee contributions and out-of-pocket costs—will have increased almost 150% from $2,011 in 2004 to $4,969 in 2014.
As a result of such figures, Jim Winkler, chief innovation officer for the U.S. health & benefits practice at Aon Hewitt, said that most businesses are now taking action to prepare for increasing cost, risk and attendant change.
"As the health care industry continues to evolve, employers realize that a traditional 'managed trend' approach will be less effective in mitigating costs increases over time,” he explained. “Instead, they are exploring innovative new delivery approaches, requiring participants to take a more active role in their own health care planning, and holding health care providers more accountable to reduce unnecessary expenses and create more efficiency in the way health care is purchased."
Recent Aon Hewitt research also found that 72% of employers now focus their health care strategy primarily on programs that improve health risk and reduce medical costs. [The firm provided some good information for workers to digest when considering healthcare costs earlier this month as well, which I cataloged in a previous post in this space.]
Further, as the health care landscape continues to evolve, employers will look to reduce costs using a mix of traditional and non-traditional approaches, the firm noted, including:
Private health exchanges are becoming increasingly attractive to organizations that want to offer employees health care choice while lowering future cost trends and lessening the administrative burden associated with sponsoring a health plan, about 28% expected to move into a private health care exchange over the next three-to-five years. In the private exchange model, employers continue to financially support health insurance, but allow employees to choose from multiple group plan options and insurance carriers via a competitive, health insurance marketplace.
Consumer-driven health plans (CDHPs) have surpassed health maintenance organizations (HMOs) as the second most popular plan option offered by employers. A growing number of employers are offering CDHPs as the only plan option. While just 10% of companies do so today, another 44% are considering it in the next three to five years.
Many employers are reassessing the way they offer and subsidize health coverage for dependents. Specifically, they are: Reducing the employer subsidy for covered dependents, with 54% considering reducing subsidies across all dependent tiers in the next three-to-five years; implementing or increasing surcharges for adult dependents with access to coverage elsewhere, with 69% already having implemented or planning to implement surcharges for adult dependents; adopting a unitized pricing approach, where employers charge per dependent, with 4% currently doing so and another 47% considering it for the future; assessing the eligibility of covered dependents in their plans, with two-thirds of employers already completing audits of covered dependents to ensure only those who are eligible will remain on the plan.
As health care costs increase overall, the amount of money employees will need to contribute out of their paychecks—both in premiums and out-of-pocket costs—is continuing to climb. Today, employees' share of the overall health care premium is 22%, compared to just 18.6% a decade ago. Additionally, Aon Hewitt found 47% of employers have increased participants' deductibles and/or copays in the past year, and another 43% are considering doing so in the next three-to-five years.
Cost sharing is occurring through two major initiatives: Altering plan designs, including shifting from fixed dollar copayments to coinsurance models, where employees pay a percentage of the out-of-pocket costs for each health care service; increasing deductibles out of pocket limits and cost sharing for use of non-network providers.
With employers facing the impacts of rising health care costs and declining health of the population, employees can expect to see more employers offering programs that encourage them to take a more active role in managing their health. For example, 75% of employers offer health risk questionnaires (HRQs) and 71% offer biometric screenings such as blood pressure and cholesterol.
A growing number of employers want to ensure that the health care services they are paying for are actually leading to improved patient outcomes and are seeking to hold providers more accountable. According to Aon Hewitt, 53% of employers said that moving toward provider payment models that promote cost effective, high quality health care results will be a part of their future health care strategy, and one in five identified it as one of their three highest priorities.
Those are some major changes to the way businesses and individuals alike will be dealing with healthcare costs in the near future – and it behooves truckers to get ahead of the curve on dealing with such issues to help prevent healthcare from taking too big a bite out of the industry’s collective bottom line.