Massachusetts employers have apparently decided that increasing deductibles and co-pays is a better way to control health-insurance costs than providing financial incentives for employees to seek care from low-cost, high-quality doctors.
The 2016 AIM Benefits Report from Associated Industries of Massachusetts finds that controlling the cost of providing health insurance for employees remains the dominant benefits concern for Bay State companies. Ninety-four percent of the 197 employers who participated in the survey remain “very concerned” about escalating health insurance costs, while 76 percent are concerned about increased employee cost-sharing for benefits.
Employers are addressing those escalating health insurance costs by adopting high-deductible, consumer-driven health plans. Half of survey participants offer a consumer-driven health plan, with the most common cost-containment strategies being increased deductibles (28 percent), increased employee premiums (26 percent) and increased out-of-pocket maximums (21 percent).
There is far less enthusiasm for tiered networks, which health-care economists tout as an effective method of managing costs by paying more for medical care rendered in lower-cost settings and less for care delivered in high-cost academic medical centers. Just nine percent of survey participants offer a tiered network plan, even though a third of those companies have experienced a decrease in premiums.
Seventy-one percent of companies say they have no plans to offer a tiered network product in the future. Companies that have declined to adopt tiered networks most often cite not wanting to change the levels of benefits for employees as the reason.
“The survey seems to illustrate the ‘hallway effect,' ” said Russ Sullivan, Vice President of Health-Care Solutions at AIM.
“It is difficult to potentially disrupt the health-care choices or increase out-of-pocket costs of someone with significant medical expenses who you see each day. Incremental changes to payroll contributions and co-pays are a more comfortable decision.”
Other structural changes face similar resistance. More than three-quarters of employers do not use health risk assessments to identify opportunities to improve the health of workers.
The share of employers who say they are “very concerned” about establishing a wellness program dropped to 31 from 37 percent in 2014 and 40 percent in 2012. Almost two-thirds of employers with 200 or fewer employees eligible for the Massachusetts Wellness Tax Credit said they did not know about the program.
Management of health-insurance costs will take on renewed significance for employers in 2016 as premium inflation in Massachusetts accelerates after several years of muted growth. Health insurance rates paid by small employers and individuals in Massachusetts surged 6.3 percent during the first quarter while major insurance companies are raising overall average premium rates anywhere from 3 to 13 percent.
The AIM Benefits Survey found that the average premium for coverage through a health maintenance organization (HMO) rose 9 percent this year versus 7 percent in 2014. Premiums at preferred provider organizations (PPO) will also increase 9 percent in 2016, up from 6 percent two years ago, while rate increases for high-deductible plans have almost doubled from 2014 to now.
Insurance carriers attribute the premium increases to increases in drug costs, increased levels of plan utilization and costs associated with the implementation of federal health-care reform.
The average cost to provide health insurance to a family ranges from $1,011 per month for a high-deductible plan to $1,494 per month for an HMO, according to the AIM survey. Employers, on average, pay anywhere from $607 to $986 of those premiums depending on the insurance product.
The trend toward increased deductibles and co-pays is national. Research by the Kaiser Family Foundation indicates that deductibles for all workers have risen almost three times as fast as premiums and about seven times as fast as wages and inflation since 2010.
Other highlights of the survey include:
- 87% of employers offer short-term disability benefits;
- 93% of employers offer life insurance benefits;
- 13% of survey participants still offer a defined-benefit pension plan, through 14 percent of those companies have closed to new participants;
- Two-thirds of employees, on average, participate in their company’s 401(k) plan;
- 58% of employers offer a paid time-off bank; and
- 80% of employers with a work force outside of Massachusetts plan to offer the same earned sick-time benefits required for employees who work a majority of the time in state.