M3 Trend Report: Health-care costs moderate

The cost of medical insurance is a reflection of the cost of health care bills, so if employers who sponsor insurance for their workers can bring down those bills, annual renewal meetings with their insurance carriers are much happier.

Based on the results of the annual health-care cost report by M3 Insurance, more employers are taking steps to pursue their own happiness. The 2019 Trends in Health Care report indicates that health-plan premiums grew at an overall rate of 4.4 percent, the lowest increase in the 15 years that M3 has issued the report. The report also shows that the average annual health benefit cost per employee actually decreased from $13,727 in 2018 to $13,559 in 2019. *

There is a caveat in the form of a one-year moratorium on the 2 percent health insurance tax established in the Affordable Care Act, a moratorium that’s unlikely to be extended for the 2020 plan year, but it’s still clear that employers are taking enough steps to control costs regardless of whether this levy is imposed.

Beyond the numbers, one of the study’s findings is that employers are beginning to understand how to leverage their health-plan design in ways that encourage employees to become more savvy consumers of health care. Specifically, they are leveraging co-payments to incentivize preventive care such as office visits and urgent-care visits, and they are discouraging unnecessary visits to the emergency room, where care is more expensive.

Brian Meyer, director of risk management-employee benefits for M3, says employers will continue to use plan design to encourage employees to seek care at most cost-efficient avenues possible. “That continues to be part of that [rate moderation],” he notes. “Health insurance carrier trends, just from an overall pricing and utilization trend, were a little bit down, so that was a contributing factor, as well.”

Medical education

To accomplish this, more employers are doing what’s necessary to educate their employees on holding down costs by focusing on prevention, abandoning unhealthy behaviors, and making sure they consistently monitor their health with primary care.

Communication is a big piece of it, Meyer notes, as is highlighting alternatives such as telemedicine, virtual visits, and onsite clinics or near-site clinics. Onsite clinics once were a feature only of large employers, but now more small and midsize employers are either providing them outright or pooling their resources to make them available. Employers have their workers onsite eight hours a day, so they increasingly view onsite or near-site clinics as opportunities to promote primary care during the work day.

“We are seeing that come down market a little bit to that midsize employer, and in some degree, it might not be a full-time onsite clinic, but we do see onsite care potentially happening in a variety of different ways,” Meyer notes. “Some of it is the establishment of more of a virtual clinic where you’re going to have the technology there to reach out to the provider systems.

“In other areas,” Meyer adds, “it is the provider community coming with different specialty lines or primary care, coming one or two days a week onsite to assist employers with some of those things, as well as for onsite clinics and near-site clinics.”

Another trend worth noting is an uptick in high-deductible insurance plans after a momentary dip the prior year. The plans are another way to promote consumerism, especially when they are paired with Health Savings Accounts to cover spending below those deductibles.

“Think about it from the overall trend of consumerism,” says Jeff Christensen, client communications advisor for M3 Insurance. “You’re really encouraging people to think, ‘Okay, when you’ve got that high-deductible plan, until you reach whatever that deductible is, that’s coming out of your pocket,’ or maybe a lot of employers are coupling that with Health Savings Accounts [HSAs] to keep that off the books of the claim until it reaches a larger number.”

Meyer adds that with a high-deductible plan, the true cost of care “is a little more transparent” than is the case with a co-pay for services where employees and their family members may not see the true cost of care. “So, in a high-deductible health plan, typically they will see such a dollar amount as they are meeting their deductible that reflects what that true cost of care is, whether it’s at primary care office, urgent care, or the emergency room, and they will see the differences that take place,” Meyer states. “Then, taking that one step further, when they do have HSA dollars, those are the dollars they are putting into an HSA account that can build and grow over a period of time.”

With this combination of high-deductible plans and HSAs, covered employees have more ownership over how they are spending health-care dollars because “it is truly their HSA account that is portable and available to them to use,” Meyer says. “They want to use those dollars more efficiently than if it’s a co-pay that is going toward services and the rest is on the insurance carrier or a client in the self-funded environment to take on the remainder of that cost.”



Market markers

Among state markets, Madison continues to fare well compared to other markets examined in the report, including Milwaukee, Green Bay, Wausau, and Eau Claire. While all five markets had a good year cost-wise, Madison continues to be the lowest-cost market with an average per-employee cost of $12,943, a decrease from $12,994 the previous year.

While the per-employee cost went down, the Madison market experienced an overall increase of 4.1 percent. That’s down from a 5.9 percent increase in 2018, with the insurance tax moratorium playing a significant role in the decline.

As the report notes, the Madison market is largely in the south central and southwest portions of Wisconsin, and it continues to be defined by HMO providers that are experiencing territorial growth. They are largely physician-directed rather than publicly traded HMOs, where shareholders tend to get more consideration than patients, and they feature tightly managed carrier networks. “You’ve got these HMOs that are really negotiating with themselves on claims,” Christensen says, “and they are going to charge a little bit less to themselves than they would an outside group in a PPO world.”

Mulling the moratorium

Whether this level of cost moderation can be replicated in 2020 depends on whether the moratorium on the health insurance tax is extended. The moratorium was a contributing factor to the low rate increase in 2019, but the prospects for a return engagement are iffy at best.

“It’s tough to predict what’s going to take place in Washington, particular when it’s around the ACA,” Meyer says. “We hear chatter around the ACA, such as the Cadillac tax and other proposals on potential medical device taxes and those types of things, but I haven’t heard any more recent chatter on another moratorium on the health-insurance tax. As it stands, today, and as our customers are getting their 2020 renewals, it is assumed that it will go back into effect for 2020.”

*The total cost per employee can vary based on a number of factors, including the cost and participation of dependent and spousal coverage. A similar decline also occurred in 2016.

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