A significant majority of large employers offer high deductible health plans coupled with health savings accounts, but traditional plans are not going to disappear overnight. However, industry experts say targeted communications and transparency tools giving employees context to identify the plan best suited to their families can help employers meet HDHP open enrollment targets.
According to a National Business Group on Health survey, 87% of large employers offer HDHPs with HSAs in 2016, up from 85% in the previous year. Although 33% of companies surveyed said HDHPs have fully replaced traditional plans, 50% of companies said HDHPs are still just one of several options.
The 2016 HDHP minimum deductible is $1,300/$2,600 (single/family) while the maximum deductible is $6,450/$13,100 (single/family). Maximum permissible total employer and employee HSA contributions this year are $3,350/$6750.
“Whether you introduce an HDHP as the only option or one of several, it’s disruptive. It requires an unbelievable amount of communication,” says Jeff Oldham, vice-president at the online enrollment portal benefit BenefitFocus. “It also requires a set of consumer tools that most employers do not have today.”
Orange County Government
The Orange County Government in Florida, which has about 7,500 health plan members, found out the hard way how wedded some employees were to their traditional medical plan.
In 2009 and 2010, escalating claims experience of Orange County’s self-funded traditional point-of-service and PPO plans meant they were staring at a potential deficit, says Patrick Peters, benefits and wellness administrator.
“We looked at various options like increasing deductibles and co-pays but these changes would not have been sufficient to bring down the potential deficit,” he says. “So we made the tough decision to close both of the plans we offered to employees and bring up an HDHP with an HSA as a single offering in 2011.”
“However, when Orange County transitioned to the new plan in 2011, the employee feedback we got was that they were agonizing over the change. Basically for six months we received one complaint after another,” Peters continues. When the storm escalated to the level of the mayor and other elected leaders, he says the benefits team was asked to re-think the program to see how some of the challenges could be alleviated. As a result, the following year, a new, low deductible plan was added back into the mix.
Currently the Orange County’s HDHP deductible is $1,300 for individual coverage and $2,600 for families with out-of-pocket maximums of $2,450/$4,900. The employer’s HSA contribution paid in a lump sum at the beginning of the year for singles is $750 and $1,250 for families. Once the deductible is met, employees pay 20% co-insurance for each service.
“We often recommend that there be a meaningful difference between the HDHP deductible and the employer’s contribution to the HSA so employees can’t get first dollar coverage which would normally be expected to encourage unnecessary use of expensive health care services,” says Trevis Parson, chief health actuary with Willis Towers Watson.
In contrast, the new PPO plan has deductibles of $550/$1,250 (single/family) with single/family out-of-pocket maximums of $1,550 and $3,100. Co-pays are $20 for primary care; $35.00 for specialists; $100 for outpatient surgery in a non-hospital setting; and $40 for urgent care.
Since the re-introduction of the second plan, membership in the HDHP has dropped every year from 100% in 2011 (when it was the only option), leveling out at about 50% in 2016.
The analytics are not complete, but Peters believes the demographics of employees opting to stay in the HDHP are mixed. “We have some young people who are a little more sophisticated so they understand that an HSA allows them to save for the future tax-free. Then we have people who want time to consider how much they actually spend on heathcare services,” he says.
In spite of the fact that Orange County was forced to backtrack and reinstate a more traditional low deductible plan, he notes there have been zero premium increases in the last five years for either plan. In the HDHP, premiums are completely paid for employees, and family coverage costs about $155 per pay check. Premiums in the low deductible plan are $10/$170 (single/family bi-weekly).
Orange County has developed a very comprehensive benefits communications program which keeps benefits in the forefront all year, including an internal television station where videos are produced; onsite benefits assistance sessions; emails and postcards.
But Peters believes that the most important decision-making resource available to employees is a plan comparison tool developed for his organization by United Healthcare, which helps employees work through their own situation. “For example, a diabetic who takes a certain medication on an ongoing basis can run the recommended treatment through both plan provisions to calculate under which program he/she would be better off,” he says.
Unum is an insurance company best known for life and disability products offered to employer-clients, but it also has a voluntary benefits portfolio. The company has over 10,000 employees with about 9,000 in the U.S. and the rest in the U.K. and Ireland.
Unlike most organizations, the company’s primary reason for introducing a HDHP for U.S. employees January 1, 2016 was not to reduce employer costs, says Joanne Abate, Unum’s vice president of insurance programs. “Our plan was very traditional and was grandfathered under the ACA. We decided it was a good time to add an HDHP to modernize our health care plan and give employees more choice,” she says.
While the deductible in the traditional Unum plan is $500/$1,000 (single/family), the deductibles in the new HDHP are $1,500/$3,000 (single/family). The company makes HSA contributions of $250/year for individuals and $500 for families. Premium levels are about 10% less in the HDHP.
The company used a broad range of communications strategies to educate employees about the new health plan alternative including print materials, posters, table top displays, information available on their smartphones and videos produced by GuideSpark which sit outside the company firewall so they can be accessed by both employees and their spouses 24/7.
But Abate believes the “it-looks-like-me campaign” was instrumental in educating employees about the features of the two programs most relevant to them. “I’m a 40-year-old employee with a family. I got emails saying ‘Joanne, people like you typically look at these benefits,’” Abate says. “Tailoring the message really helped us talk to people based on where they are in their lives.”
Unum also linked together voluntary benefits like critical illness, hospital indemnity and accident insurance and core benefits for the first time. “Before the 2016 open enrollment our core medical and dental programs were offered at one time of the year and our voluntary benefits were offered at another. But by tying the messages together we are able to show how these kinds of coverage complement each other,” she continues.
In the first open enrollment period, Unum’s goal was for 7% to 10% of U.S. employees to transition to the HDHP plus HSA. With 7% selecting the new high deductible option, Abate is satisfied that company objectives have been met. “We thought we were going to attract young, healthy millennials but we actually got a good cross-section of employees including families and some people looking ahead to the world of retirement.”
Looking into the future, she says that the company may move away from their traditional plan completely to a series of HDHPs with high, medium and low deductibles. “My crystal ball is not working so well right now, so I would say this will probably happen in the next three to five years.”
Industry best practices
Larry Boress, the president and CEO of the Midwest Business Group on Health acknowledges that communicating HDHPs and HSAs is a huge challenge because people have been used to just paying small deductible and co-pays and relying on their employers to tell them what hospitals and networks are best.
He believes that employers who integrate their wellness programs into their HDHPs are more successful. For example, he recommends employers contribute additional amounts to the HSAs as a way to encourage workers to get flu shots or complete a health risk assessment.
“People typically spend more time researching the price of a widescreen TV than healthcare cost alternatives. Having user groups for HDHP members and educating supervisors, managers and union leaders can helpful,” says Boress.
And with more people having to make decisions about when to get care and where to get care, he says transparency tools that have become available in the last four or five years give people important information so they can compare doctors, hospitals, drug costs and treatment options.
He also notes that open enrollment season isn’t the only time employees should hear from HR about benefits. He says ongoing communications are ideal for HRA/HSA programs because employees are using their benefits all year.
“In order to increase and maintain HDHP/HRA enrollment, be smart about focusing your rollout, ongoing communications and support efforts to address the true value of your program,” says Boress.
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