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For employers with calendar-year plans, the summer months can be a time of relative peace and quiet. The renewal is long past, run-out periods are over, and open enrollment is still several months away.
Discerning employers will use this time to consider plan design changes that will promote the welfare of their participants and counteract the steadily rising cost of healthcare. For even though the skies may be clear at the moment, a perfect storm is approaching at the intersection of three trends: increased healthcare premiums, increased healthcare costs, and Americans’ increased unhealthiness.
Increased Healthcare Premiums: Last year was actually a “good year” for premiums. It was the first time in five years that average premiums did not increase by at least 10%. Still, the Kaiser Family Foundation’s annual survey shows the 2005 rate of 9.3% was several times the inflation rate (3.5%) and the increase in wages (2.7%). To illustrate, take the example of a $100 premium in 1999 and look at how it has increased for these three indicators. That $100 premium has now risen to $197 while wages ($124) and inflation ($120) have lagged far behind.
Increased Healthcare Costs: A recent Hewitt survey showed employers expect a 10% rise in costs, but can only afford 7%. Despite the widening gap between costs and affordability, the survey reported that less than one in three employers has a written healthcare strategy for managing expenses. U.S. healthcare spending has been on a steady climb for three generations, according to the Centers for Medicare and Medicaid Services. In 1960, healthcare expenditures were only $28 billion; in 2004, they topped $1.8 trillion.
Increased Unhealthiness: One indicator of general health is a person’s body mass index (BMI), which takes into account height and weight. According to the Centers for Disease Control and Prevention, the number of Americans with an above-average BMI was 44.8% in the early 1960s; for the last measured period (1999-2002), it is now 65.2%. A recent report from the journal Diabetes Care estimated that more than 73 million Americans either have diabetes or have a higher-than-normal risk of becoming diabetic.
Thus, employers should address these issues proactively by considering one or more Consumer Driven Health Care measures:
- Health Savings Accounts/High-Deductible Health Plans (HSAs/HDHPs): This year marks the third year of HSAs, and they are beginning to see some market penetration. An American Health Insurance Providers study reported that some 3.2 million HSAs have been opened. The Treasury Department forecasts HSA growth to be 14-21 million by 2010, covering up to 45 million Americans. The time may be right to add an HSA/HDHP offering to your benefit mix.
- Health Reimbursement Arrangements (HRAs): HRAs are a great way for employers to offset higher deductibles and/or premiums by providing employees money for medical expenses. United Health Group recently announced that combined HRA/HSA members have jumped by 75% from a year ago to a total of 1.75 million enrollees.
- Wellness programs: There is a growing body of evidence that wellness programs not only increase morale but can have important cost-saving advantages as well. A May MSNBS story listed 25 things we can do to live healthier lives. Many were focused on prevention: blood pressure checks, cholesterol testing, immunizations, and screening for things like cervical cancer, breast cancer, depression, Chlamydia, Osteoporosis, and Diabetes. Due to the fact that employers can fund or even provide incentives for such measures, they are likely to see some eventual cost savings.
Depending on your current plan design, there may be other ways to reduce – or limit the increase of – healthcare costs. Infinisource is available for provide a wide variety of benefit administrative services related to HRAs, HSAs, Flexible Spending Arrangements as well as benefits enrollment and consolidated billing. For more information, contact the Sales Department at 800-779-6384 or SalesSupport@infinisource.net.
One thing is certain: employers who spend their summer months analyzing their current design, past claims history and participant demographics will be more likely to reap the benefits of such an analysis when winter renewals come along.
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