Survey Says: Plan Designs Reflect Market, Regulatory Forces
As is the case for many employers, the design of your health care plan is likely based on a mixture of benefits philosophy, legal requirements, financial parameters and workforce demographics. Yet you shouldn’t make plan design decisions in a vacuum. Knowing what other employers are doing and discovering new opportunities to build greater plan efficiency are essential.
A comprehensive annual survey by United Benefit Advisors (UBA), a consortium of benefits consulting and brokerage companies, offers a good look at what’s going on. The UBA’s Benefit Plan Design and Cost Benchmarking Key Results, based on 2014 data from 9,950 employer client firms, identifies some significant trends in health care plan design.
Waiting on wellness
One important trend is that wellness program activity is basically at a standstill — or among smaller employers even declining. For example, 10% of employers with between 25 and 49 employees were offering wellness programs last year, down from 11.2% the prior year.
Sponsorship rates of wellness plans correlate directly with employer size. About 60% of employers with at least 1,000 employees have wellness plans, vs. only 8% of employers with fewer than 25. Among employers with wellness plans, prevalent program components include:
- Health risk assessments (80%),
- Incentives/rewards (67%),
- Physical exam or blood draw (63%),
- Coaching (52%),
- Web portal (49%),
- Seminars/workshops (40%), and
- “Other” (15%).
UBA analysts attribute the slow development of wellness programs to pending litigation asserting discriminatory practices in this area, as well as “the regulatory environment becoming increasingly restrictive.” Interestingly, however, the Affordable Care Act (ACA) does include incentives for establishing formal wellness programs.
Growing CDHP enrollment
Another significant trend identified by the survey is the continuation of one that has been in progress for several years: growing sponsorship of consumer driven health plans (CDHPs) — typically defined as high-deductible plans under which participants pay expenses through medical savings accounts such as Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs).
That is, 24.3% of employers were offered CDHPs in 2014, up from 22.5% in 2012. Meanwhile, HMO plan options have declined — they were provided by only 17.3% of employers in 2014, down from 19.1% in 2012. In addition, enrollment number changes in these two plan types are more dramatic: For CDHPs, enrollment grew by 32% (to 20.6% in 2014 from 15.6% in 2012), and HMO enrollment slid by 21% (to 11.9% in 2014 from 15.1% in 2012).
That growth in CDHP enrollment occurred despite a drop in employers’ average contributions to the HSAs that typically accompany CDHPs. The average employer HSA contribution has fallen by 10.4% to $515 for single coverage (and to $890 for family coverage).
Meanwhile, the average employer contribution to an HRA was $1,750 for single coverage and $3,461 for family. More than one-third (33.6%) of health plans last year featured either an HRA or an HSA.
Nationwide, the average total costs (employer plus employee) of CDHPs last year were the lowest of the various categories. Here’s a rundown:
Plan Type Cost
PPO $ 9,828
HMO $ 9,072
CDHP $ 8,919
The average CDHP employer cost, at $6,026 (68% of the total), was also the lowest. By comparison, combining all plan types, the average employer/employee cost split was 66% to 34%. Overall plan costs were highest in the Northeast ($10,931) and lowest in the Central states ($8,088).
Despite the growth in CDHP enrollment, the standard PPO continues to be relatively popular — though PPO enrollment numbers show a slight decline. Specifically, on a national basis, 59.5% of employees covered by a health plan were enrolled in a PPO last year, down a notch (3.6%) from 61.7% two years before.
Significant plan popularity distinctions exist among geographic regions, however:
Region: Northeast Southeast North-Central Central West
CDHP offered 30.2% 26.3% 29.3% 21.0% 15.0%
PPO offered 25.1% 39.1% 54.4% 63.6% 50.6%
CDHP enrollment 26.2% 18.5% 29.4% 21.9% 7.8%
PPO enrollment 36.6% 44.4% 56.8% 67.6% 76.0%
Highlighting other items
The UBA survey contains a variety of other information of interest:
- Average deductibles for in-network coverage “remained fairly level” at $1,901, though out-of-pocket maximums (a median value of $3,500 for single coverage and $8,000 for family) were up by more than 6%.
- Nearly half (48%) of covered employees opted for dependent coverage.
- A significant minority (38%) of employers provided domestic partner benefits, and 28% of them provided it to both opposite- and same-sex domestic partners.
- “Many small employers” based in states that didn’t permit renewal of pre-ACA plans saw rate increases “of 30% to 160%.”
- Only 10% of surveyed employers provided coverage to employees working fewer than 30 hours a week, a percentage expected to decline further.
- The percentage of plans with no copays for in-network care dropped by 14% to 36%, and the percentage of plans with no in-network deductibles stands at about 20%.
The survey also addresses the prevalence of self-funding. Overall, 11% of employers self-funded. But 80% of employers with at least 1,000 employees chose to self-fund. UBA’s analysts believe that self-funding “will be increasingly desirable to employers of all sizes in the coming years as a way to avoid various costs and compliance aspects of health care reform.”
If there’s one general take-away from the UBA survey, it’s that health care plan design is very much an evolving environment at the moment. Employers are actively managing their plans to respond to changing conditions and opportunities, driven both by market forces and the ACA.