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You are here: Home / Anderson On Health Insurance / Employer sponsored coverage notes

Employer sponsored coverage notes

by David Anderson|  September 14, 20166:06 am| 22 Comments

This post is in: Anderson On Health Insurance

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Just a few interesting things on the employer sponsored coverage (ESI) beat as that is where most people get their private market coverage.

First Bruce Japsen passes along some good news on ESI premiums.

In a new analysis, Mercer said per-employee health costs will rise 4% after companies make changes like raising worker deductibles or switching carriers. Without changes, employers will see costs rise 5.5% or more….

We can’t quite tell if there is a drop in actuarial values. Increased nominal dollar cost sharing would be expected every year as medical trend growth rate is over 0% and usually over the general growth of the economy. We also can’t say if there is a hedonic adjustment in downward quality or if companies are switching to take advantage of carriers in different points of the underwriting cycle. Finally, I am always surprised that there is never more talk about tweaking networks to lower costs while holding actuarial value and plan designs constant but that just might be my bias as a former network plumber.

The second interesting thing I saw recently was on the proliferation of high deductible health plans (HDHP). Bob Herman at Modern Healthcare has the story:

Approximately 40% of Americans under age 65 were enrolled in some kind of high-deductible health plan as their primary coverage as of this past March, up heavily from 25.3% in 2010. Within that 40%, 24.7% of people were in a plan that was not paired with a health savings account. The other 15.3% did have an HSA, which is a tax-free pool of money that people save and can use on their healthcare.

The crux: More people are getting insurance, but they continue to be responsible for more of the cost of their care.

I’ve always been skeptical of high deductible health plans as a good source of value for most people. People are bad shoppers when there are complex financial instruments interacting with a jargon filled service provision sector and massive informational uncertainty. More importantly, it places a heavy obligation on people who may not have reserves to handle a financial shock.

I’ve always thought that HDHP’s have a limited place as a limited option for people who at the start of the policy year can show that they are healthy and have the financial ability to take the hit of paying the full out of pocket maximum without seriously impairing their financial future. My wife and I would be good candidates. My parents have the ability to take the financial hit but they are guaranteed to take that hit by the end of the first quarter of coverage. As a general purpose or common plan design, I don’t think it is an appropriate choice for quite a few people. This is a weakness of the off-Exchange market and the Bronze/Catastrophic segments on Exchange.

And this sums up the health policy wonk debate:

I’m old enough to remember when lots of policy wonks thought high-deductible health care plans were awesome and the answer to everything.

— Aaron E. Carroll (@aaronecarroll) September 9, 2016

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Reader Interactions

22Comments

  1. 1.

    Mark-NC

    September 14, 2016 at 7:47 am

    In my plan I had a choice to make. I have a $5k deductible but I could opt for a $2.500 deductible or a $1,000 version.

    To go from $5,000 to $2,500 my monthly payments go up by $200. That means I pay the $2,500 deductible even if I don’t use insurance at all.

    To to from $5,000 to $1,000 my monthly payments go up by $400. That means I pay the $4,000 deductible even if I don’t use insurance at all.

    How do you fix that? Other than National health care.

  2. 2.

    Xantar

    September 14, 2016 at 7:50 am

    Richard, assume for a second that we can deal with the vast political blowback somehow and we managed to get rid of the tax deduction employers get for providing insurance. It seems to me that this would be a net positive because more people would be pushed into the individual market and employers in general would be less insulated from the true cost of healthcare. Employers might even choose to pay employees more cash instead of pouring more money into health insurance.

    What do you think?

  3. 3.

    I'mNotSureWhoIWantToBeYet

    September 14, 2016 at 7:53 am

    Kindasorta related. Trump’s “6-weeks paid maternity leave” story is getting some play today (e.g. Drum and NPR). Of course, there’s too little in the actual proposal to figure out what he means, but supposedly it would be run under the unemployment system.

    Unemployment insurance is another state-run disaster in many ways. In Virginia, the weekly UI benefit ranges from $54 to a maximum of $378 for a whole 12-26 weeks (depending on earnings during employment). If you’re paying $1000 a month for rent (very very easy to do in NoVA), then having your income fall to a maximum of $1500 a month doesn’t leave much actual cushion.

    I obviously haven’t read or heard all the reporting, but Drum says the maximum benefit is $450/mo – maybe that’s in the case in California (he doesn’t say), but that’s certainly not universal.

    As usual, Trump is punching down while pretending he’s some Super Generous Everyman and the press is doing little to push-back.

    Paid maternity, sick, family and vacation leave is vital for a healthy workforce and economy. Running it through the unemployment system doesn’t make sense – there should be a uniform national system (on duration if nothing else) based on actual data and science and not just based on “this is the amount of taxes our employers say they will tolerate, and it was good enough in 1965 so it should be good enough now”.

    The problems in America aren’t due to the young and struggling and poor having too much money. In many ways, it’s just the opposite.

    I appreciate your reporting on these issues. Thanks.

    Cheers,
    Scott.

  4. 4.

    I'mNotSureWhoIWantToBeYet

    September 14, 2016 at 7:57 am

    @I’mNotSureWhoIWantToBeYet: Ack. In Drum’s piece, the maximum is $450/week not per month.

    Sorry.

    Cheers,
    Scott.

  5. 5.

    daveNYC

    September 14, 2016 at 8:15 am

    @Xantar: That would probably be a pretty miserable experience for most people. Companies probably wouldn’t send all the cash they’re paying on health care along to their employees, and I don’t think anyone will be excited about having to purchase their own health care.

    Unless a lot of other changes went along with it, I think it’d be a great way to lose the next election or two.

  6. 6.

    Edward G. Talbot

    September 14, 2016 at 8:18 am

    Agreed on HDHP. It’s awesome for my situation but I completely agree that it’s crappy for most people and if it were no longer available in favor of an approach that helps more people I’d be fine with that. I should note that it’s not uncommon for HDHPs to be the “best” (from an overall cost standpoint not a financial planning standpoint) both for people who use almost no services and those who hit the deductible every year. There’s often a window surrounding using about half the deductible where having the other plan would be better. That has been the case at my employer every year, though it’s worth noting that cheaper prices for preventative drugs in the HDHP helps make the formula even more compelling for us. That difference has gone down with the ACA but it is still there.

  7. 7.

    Amir Khalid

    September 14, 2016 at 9:04 am

    @I’mNotSureWhoIWantToBeYet:
    A measly six weeks paid maternity leave? In Malaysia, a woman gets two months.

  8. 8.

    laura

    September 14, 2016 at 9:09 am

    In my service area, public employers have been flogging HDHP and HSA’s -and offering financial inducements such as a 2k contribution to the HSA in year one. With very few exceptions, they only work for those who can realistically expect to have minimal use for Healthcare services. I lost track of calls from Union Members with extreme buyer’s remorse at the actual costs of deductibles and perscriptions.

    However, it’s the banks that are the third-party administrators of the HSA that really get my spidy senses up. The hard sell, captive audience razzmatazz during open enrollment about the HSA as an investment vehicle like a Second 401k(!) What could possibly go wrong. Invariably, the young, strong invincible -usually police and fire, see this as a way to increase personal wealth become the cheer squad and average, older or those with chronic conditions opt for these plans because they, too, believe this will leave them financially better off -until their not.

    And when they’re worse off, they call me and ask if they can opt for an ACA plan because they can’t afford their share of costs after their premium contributions. Because their employer offers coverage I have to explain that they don’t qualify for exchange based plans.

    So Richard, do you have an opinion about the HSA as investment vehicles? I don’t recall any discussion of this aspect of the health insurance industry and wonder if my concerns are well placed.

  9. 9.

    Xantar

    September 14, 2016 at 9:11 am

    @daveNYC:

    That’s why I wanted to assume a hypothetical situation where we dealt with the political blowback somehow.

    We need to get employers out of the business of supplying health insurance.

  10. 10.

    Richard Mayhew

    September 14, 2016 at 9:15 am

    @laura: I hate the investment component. If I was healthcare dictator for a day and told that I had to include HSA in my plans, I would split the investment structure. The first two years of deductibles would be invested only in money markets/30 day t-bills/savings accounts. The goal is to make sure the money is there, not growth. Anything above 2 years of deductible could be invested in whatever.

    The issue is that the medical expense reserves should be extremely safe and not volatile.

  11. 11.

    Butch

    September 14, 2016 at 9:19 am

    How, realistically, can most consumers “shop” for medical coverage (especially in rural areas, as where I live)? I’ve never seen a good explanation.

  12. 12.

    daveNYC

    September 14, 2016 at 9:37 am

    @Xantar: Yeah, but that’s like the old ‘assume a can-opener’ joke. The only way you might be able to eliminate the blowback would be if companies had to pass on all their contributions to the health care premiums to their employees, and then somehow do something magical to improve the selection of plans available on the exchanges, ideally to include something or other so that people could purchase their existing employee provided plan.

    And even then, you’re looking at a dilution of bargaining power, since Citibank (for example) can probably negotiate a better deal for health insurance than each individual Citibank employee can.

  13. 13.

    ruemara

    September 14, 2016 at 9:52 am

    I’m going to have to consider health insurance again once I start the new job. This does not encourage me.

  14. 14.

    Barbara

    September 14, 2016 at 10:09 am

    It really is a boondoggle. My husband and I are now required to enroll in the HDHP. Basically, if you can afford it, you just pay out of pocket and invest the money in the account and then you get to use it tax free to pay unfunded health expenses after you retire. It’s a great deal for people who don’t really need it. It’s a burden on people who have chronic conditions like asthma. I am convinced it does nothing to make people conscientious consumers of medical care, even for those people who have the resources to do it.

  15. 15.

    Kylroy

    September 14, 2016 at 11:11 am

    I personally consider HDHP plans fundamentally evil because they screw consumers while making sure that medical providers are largely made whole. Lots of people will be devastated by a $2,000 dollar bill they can’t afford, but the hospital can still get the rest of their $20,000+ covered without the patient setting up a GoFundMe (and/or generating bad press).

    I realize a a small portion of the population can use them, but these are people who are A) healthy, and/or B) very astute about their healthcare spending. These are not people we need to give additional assistance to.

  16. 16.

    Miss Bianca

    September 14, 2016 at 11:11 am

    @Barbara: I liked having the HSA for things that weren’t covered, like glasses and dentists’ appointments. I wouldn’t mind having one again, frankly.

  17. 17.

    West of the Rockies (been a while)

    September 14, 2016 at 11:15 am

    So, did the cost of providing insurance really rise 5% or are insurance companies and their squealing pool of investors (who want their big, fat dividend check) just decide they needed more sweet dollars?

    It feels like we are all beans in a pot, and the temperature is getting higher and higher, but no one can figure out whose hand is on the heat knob. (My apologies for a very imperfect metaphor.)

    Is it doctors, trial lawyers, insurance executives, insurance scam artists, big pharmaceuticals, or something else that is causing the ever-increasing costs?

    You briefly identified some combo platter of factors in the comments section to one of your posts a few weeks ago, Mr. Mayhew, but I think further discussion might prove edifying.

  18. 18.

    West of the Rockies (been a while)

    September 14, 2016 at 11:16 am

    @Miss Bianca:

    Yes, wouldn’t it be nice if our damn mouths and eyes were covered by insurance? Too much to ask, I suppose.

  19. 19.

    laura

    September 14, 2016 at 11:49 am

    @West of the Rockies (been a while): the explanation I was offered for premium rate increases in my service area was primarily due to a handful of individuals who required some new and extremely costly medications including solvaldi for hep-C and gleevac type medications for “rare” cancers.
    A 5% increase is not exorbitant when looking back on pre-ACA years where double-digit increases were common year after year with no explanation or justification other than because we can.

  20. 20.

    West of the Rockies (been a while)

    September 14, 2016 at 12:53 pm

    @laura:

    The price hike may not be exorbitant, but I no longer trust insurance companies to be transparent and forthright for the reason you mentioned (years of price rises because neener–neener!

  21. 21.

    Mnemosyne

    September 14, 2016 at 1:27 pm

    I’ll be curious to see what changes are made this year. The Giant Evil Corporation I work for is self-insured, so we tend not to have the same kinds of big changes that employers who depend on insurance companies do. Our insurance company is an administrator and doesn’t set prices.

  22. 22.

    maurinsky

    September 14, 2016 at 1:44 pm

    I had a HDHA guy come speak at our workplace once, and he argued: they’re necessary because it means medical consumers (ugh) have some skin in the game.

    I had to respond “with all due respect, if you’re seeking medical care, it’s not just your skin, but your organs, bones, veins, everything in the game.”

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