As high deductible plan popularity rise so do premiums
As the shift toward consumer-directed healthcare continues and high-deductible health plans are on the rise, employers are pairing plans with more voluntary benefits options to fill the deductible gap; however behaviors across the country vary widely.
Benefit administration and technology firm Benefitfocus recently released its State of Employee Benefits report of 500 plus U.S. employers examining how the country varies in healthcare offerings and adoption.
While most of the country is witnessing rising enrollment in HDHP offerings and increased investment in HSAs, the southern states are suffering from the highest out-of-pocket costs for all plans.
Southern workers carry higher-than-average financial responsibility for their health plans, paying the steepest PPO and HDHP deductibles in the country. On average, these employees are paying 6% to 17% higher HDHP deductibles and 22% to 37% higher PPO deductibles than other regions.
Since 2016, the share of employers offering at least three voluntary benefits has risen 138%, demonstrating more choice for Southern employees.
Yet Carrie Bartlett, senior consultant at OneDigital, says she was surprised to see that health maintenance organizations were not mentioned as cost drivers for the South.
“HMOs typically have lower reimbursements than preferred provider organizations which drives the cost down quite a bit,” Bartlett says. “It naturally impacts the cost of PPO reimbursement because the health insurance carriers really have to price competitively to get doctors to participate in their network.”
HMOs still remain a popular choice on the West coast despite a 25% decrease in enrollment; however Bartlett adds that this is due to HMOs having more popularity in metropolitan areas while much of the South remains rural.
“There are some large metropolitan areas across the South, but doctors do not have to take the reimbursement of an HMO and instead will not participate at all aligning only with PPOs,” she says.
Because of the lack of HMO options, southern workers average around $1,300 in out-of-pocket expenses under a PPO plan. Even under a HDHP employees still face the highest out-of-pocket cost in the country averaging $2,416.
The spectrum of price
Allison Hancin, director of marketing at Healthgram in Charlotte, N.C., says while the study from Benefitfocus highlights total cost of healthcare premiums, the cost of procedures within the region can drastically affect the amount of out-of-pocket cost as well.
For example, a screening colonoscopy can range from $817 to $10,403 in Charlotte, N.C., according to a report by Healthgram. This is a variance of 1,273% and the steepest of a number of variances in procedural cost; from screening colonoscopy to abdominal ultrasounds.
“Price variances exist on both levels — and it is hard for employers and employees to feel confident that they are paying a fair price for care,” Hancin says. “This is at the core of what is driving premiums and out-of-pocket costs for employees outlined in the Benefitfocus study.”
Similar to the South, the Northeast is seeing higher premium cost. Those in this region pay the most for their health plan premiums, both for HDHPs and PPOs. This amounts to paying 8% to 13% more for PPOs and 9% to 22% more for HDHPs than the rest of the country.
The average premium share for an employee in the northeast pays $1,692 into the cost, while employers share on average $4,906 under a PPO plan. For HDHP, the employee pays a smaller premium of $1,237; however the employer pays an increased share of $4,919.
West leads in HSA contribution
While the South struggles with high deductible cost and the Northeast suffer from higher premiums, the west coast is leading the way in HSA contributions, which corresponds with rising HDHP adoption.
High deductible plans have risen 76% since 2016 and average the highest HSA contributions in the country with $1,490 of employee contribution and $750 of employer contribution.
Nolan Waterfall, vice president of Qandun Insurance Agency out of Los Angeles, says this is due to PPOs and HMOs becoming more unaffordable for employers to provide.
“Looking back just a few years ago, conversations about HSAs were almost impossible from the employees’ perspective because there was a lot of misunderstanding around their function,” Waterfall says. “People have started to realize that they are not getting their money out of the fully insured plans.”
Waterfall confirmed the Benefitfocus’ claim of HMOs remaining popular in the West saying most employees in California are enrolling in a HDHP coupled with a HSA or they are enrolling in a narrow network HMO plan.
“It really comes down to price,” he says. “I think a lot of people enrolling in HMOs need to be educated on how they work because many start with the price and then determine what they get out of the plan later.”
The Midwest shares the same positive outlook on HDHPs as the West claiming the highest offerings and participation rates despite low PPO costs. At least 70% of employers are offering high deductible plans to their employees, which is up 52% since 2016.
Linda Keller, employee benefits national COO and practice leader for HUB International says while the report by Benefitfocus shows substantial increases in HDHP offerings across the country, these numbers will taper off.
“HDHPs are beginning to hit their peak and we’re not seeing much utilization from year-to-year,” Keller says. “Some employers who have begun to offer high deductible plans are also informing their employees that this will be the only plan option eventually.”