What did you learn about health care costs?
For the fourth year in a row we found that employers have managed their health care costs to right around 6%. When we asked them what they are projecting for 2009 they’re sticking with that 6% number.
The data was gathered mid-year 2008 and now there’s a lot of economic uncertainty out there. How is that affecting the results?
Since we fielded the survey the million-dollar question tends to be what’s going to happen to trend?
For an environment where the outlook is strong, you may have people putting off care ... because they just have other financial priorities. [Then,] you will have some businesses [where] the outlook is not so good, and so people are going to be rushing to get care.
We do think that there will be pressure from the providers to increase their costs because of what is going on in the economy and because of traffic through their offices and their hospitals declining.
What are employers doing in response to the economic downturn?
We went back out to the respondents of our survey in late November to ask them if anything really had changed as a result of what was going on in the economy. We found that employers are definitely looking for ways to implement changes that could impact their costs in a positive way. We also found from employers that they are considering making revisions to their budgets. Some employers are starting to talk just a little bit about the opportunity to make changes mid year to their benefit programs. I have to say, in my 20-plus years of doing this, this is the first time I’ve heard employers talk about making changes not at the beginning of a plan [year].
What’s an example of a mid-year change?
You could actually make changes to your plan design. You could increase your deductibles and co-pays and out of pocket maximums. You could make changes to the employee contribution strategy. Some employers, depending on their situation, may be thinking about a total new design.
But haven’t employers been saying that they’ve reached the limits of cost-shifting?
The interesting thing that our survey pointed out this year was that the median deductible for a PPO reached $1,000. And so, when you think about even just the design of a consumer-directed plan, with our PPO we’re approaching what a lot of the
consumer-directed plans look like. So there is definitely still cost shifting. I don’t think that it is as dramatic. It’s the tweaking that happens every year. Because the renewal comes in at 10%, you need to get it down to 8% or 6% ... and so you look for those little tweaks that you can make.
What are employers doing to save costs?
The vendor marketplace is very competitive, and so many employers are telling us that they are focused on the fees that they’re paying to their vendors. They’re entering into direct negotiation to try to lower those fees.
Interestingly enough, we did have some folks [who] responded to the survey [who] indicated that they were considering insured arrangements for medical and also for life and disability. The attraction to an insured arrangement is that it sort of insulates you a little bit from the risk of fluctuation of what might happen with your population or with the market.
A majority of respondents want to renegotiate fees by 2010. What might that look like?
What happens is that let’s say that you have a self-insured PPO plan. If you negotiated that contract, let’s say five years ago, what happens is that every year that admin fee goes up between 3% and 5%. It’s usually somewhere around CPI, which is fine, it’s a small portion of your total expense, and so it doesn’t ever really look like a whole lot of money. But, overtime, those fees can get out of whack with what’s going on in the market. It’s worth it to go get other bids or to really sit down and have strong negotiations to say, ‘We need to get back to what’s reasonable here. We called some other employers and benchmarked our fees, or our consultant helped us do that, and here’s what our expectation is.’
What are employers with 5,000 or more employees planning for the next five years?
We use this particular question as a barometer for what we might be seeing that will become mainstream over the next several years. The No. 1 response was facilitating the creation of personal health records. I think that there’s a strong belief that this is good for administrative simplicity, as well as for the individual to have all of their health records together. It hasn’t caught on as quickly with individuals, but it’s a good long-term goal.
What’s really interesting are the next two on the list, and they are promoting the use of retail clinics [and] the opportunity for Web-based medical consultations. They’re all about convenience for the employee. Saving time, saving money, getting that health care faster, getting it at a lower cost to the employee. It really opens up an interesting opportunity for employers to think about targeted communications that they can do around what you need to know about your benefits and what it will cost you if you don’t.
Have you studied personal health records?
We haven’t specifically. I think the issue with the personal health records is a fear around privacy, and until we can get individuals over that hump, I think that that’s a hard thing to do. Hopefully we will get to the point where we can do that, because it will save time and it will definitely cut down on paperwork.
What does the survey tell you about the state of consumer-driven health?
Nationally we’re at about 7% of employees that are enrolled in consumerdirected health plans. Most of them are enrolled in an HRA-type program versus an HSA. The interesting thing that we asked is, ‘Do you think that a consumer-directed account will be the only thing that you offer five years from now?’ About 8% of employers said [yes].
When we look at the jumbo marketplace, those that have 20,000 or more employees, the number goes to 16%.
What is the energy level around HSAs?
While many people are planning for retirement, they aren’t planning for retiree medical, and we have seen a decline in employers offering retiree medical benefits. The nice thing about putting the money in the HSA is that you get the triple tax advantage. It’s the nicest thing the IRS has ever done for us and it’ll probably be the last. The money’s not taxed going in, it grows on a tax-free basis, you use it on a tax-free basis as long as you stick with the guidelines for a bona fide medical expense. As people focus more on what their exposure is for health care plans after they retire, I think that that could give these plans more traction.
What do you think about value-based benefit design?
The idea is that if you focus particularly on your chronically ill, if you can get them in compliance with what they’re supposed to be doing to take care of themselves, there’s a huge ROI.
Today it’s really been focused on the prescription drug component of it. I do think that we will see that evolve as we test more opportunities to use evidence-based design to get an ROI.
Wellness is a focus for many employers. What are you hearing on that front?
What our survey said is that employers will focus on those things that are very specific in what they’re trying to do and what they’re trying to accomplish. Your disease management programs, other types of things to raise awareness that can directly relate to an action that’s going to happen. Some of the more fluffier type-programs may not get the same type of support. We may see some cuts there, but I think for the direct connection for disease management, health management, that we’re going to continue to see those because they have been documented to produce a return.
