HDHPs Becoming Dominant Health Benefit Plan
The average reported increase in medical plan costs before plan changes was 7.9% for 2014, according to PwC’s 2015 Health and Well-Being Touchstone Survey.
The average reported annual increase after plan changes was 4.5% for 2014, about the same as last year and lower than the 5.3% predicted in the 2014 Touchstone Survey. The expected increase has dropped to 4.1% for 2015.
Employers are aiming to lower medical costs through plan changes including the addition of new options such as high-deductible health plans (HDHPs). While preferred provider organization (PPO) plans remain as the plan type with the highest enrollment, this is the first year where PPO prevalence is less than 50%, PwC says.
HDHPs have the most membership 31% of the time, up from 26% in 2014, and are the second-most popular plan. Eighty-three percent of employers offer an HDHP; 56% offer an HDHP with a health savings account (HSA) and 18% offer an HDHP with a health reimbursement arrangement (HRA).
Thirty-one percent of employers noted that an HDHP is their highest-enrolled plan, compared to 17% in 2011. Small employers are moving to HDHPs as their highest-enrolled medical plan from 27% in 2014 to 32% in 2015. One-quarter of employers have already adopted a full-replacement HDHP plan and an additional 37% are considering a HDHP-only strategy in the next three years.
There was a significant increase in medical plan options across all employer sizes, and most notably among large employers. For example, large employers increased from 3.6 plans in 2014 to 5.7 plans in 2015. PwC says this trend could be the result of employers working to optimize discounts by offering network alternatives and/or increasing choice to meet the diverse needs of their multi-generational workforce.
The survey finds employers continue to invest in wellness programs, with 73% offering them. For those that offer wellness programs, participation hovers below 30% unless incentives are used. For three popular program components (biometric screening, body mass index (BMI), and health risk questionnaire) the participation rates increase by more than 25 basis points when incentives are used.
Cost shifting through plan design and increased contributions are the most prevalent choices for employers to control health care costs. Forty-two percent are considering changes in medical design (44% have already made changes) and 48% are considering increasing prescription drug cost sharing (29% have already increased). Nearly half (49%) are considering increasing employee contributions (38% have already increased), and 42% are considering moving to a defined contribution approach (8% have already moved).
Other cost-saving approaches employers are considering include: high-performing networks (37%), value-based plan design (42%), incenting employees to utilize accountable care organizations (ACOs) (33%), and expanding wellness (40%).
Twenty-eight percent of employers are considering moving their active employees to a private exchange, and 2% have already done so. For those that offer retiree medical coverage, 69% are considering moving their pre-65 retirees to a private exchange and 6% have already moved their pre-65 retirees. For those that offer retiree medical coverage, 53% are considering moving their post-65 retirees to a private exchange and 18% have already moved their post-65 retirees.
The Touchstone Survey report is available here.