At Work

Workers beware – open enrollment for you health benefits is on the way – watch your pocketbook😷

Based on a survey by the National Business Group on Health, large employers are, as usual, in a cost shifting mood. Despite all the political back slapping, health care costs have not been lowered, have not been controlled and are still increasing at several times general inflation. What does this all mean for workers? It means a likely net reduction in their discretionary income and greater financial risk. 

Here are the top three changes large employers are planning for 2016. Note how employers are getting more involved in telling you what health care to receive if you want to be reimbursed.

Few people will admit it, but we are on the road to eliminating employer-provided health benefits. It will take several more years, but eventually we will get there … to the detriment of workers in my opinion.  😪

1. Higher premiums. Large employers expect their health care costs to increase by about 5% for 2016 – the same size increase they expected in 2014 and 2015. They plan to pass along some of the extra cost to employees but more of it to dependents, with employees contributing 20% of their own premiums and 24% of the premiums for dependents (higher-income employees may pay more). About one-third of the companies plan to add a surcharge for spouses who could get coverage elsewhere but don’t. But very few (only 4%) plan to exclude spouses who have similar coverage available through their own employer.

2. More high-deductible health plans. Employers are continuing to try to contain rising costs by forcing employees to take more control of their health care: 83% of large employers plan to offer a consumer-directed health insurance plan in 2016 (primarily high-deductible health insurance paired with a health savings account). Half of the employers plan to offer the high-deductible plan as an option, and 33% plan to offer it as the only option. More than half contribute to employees’ HSAs, giving them tax-free money for medical expenses; some add more if you participate in a wellness program or take a health risk assessment. For more information about HSAs, see FAQs About Health Savings Accounts.


3. Restrictions on expensive drugs. Employers identified the cost of specialty drugs as one of the major causes for health care cost increases, and they’re imposing more restrictions on coverage. More than three-quarters of the employers surveyed plan to use prior authorization for some of these specialty medications – requiring physicians to fill out forms explaining why you need the specific drug. Three-quarters plan to use step therapy, covering the drug only after you’ve tried a list of less-expensive medications first.

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4 replies »

  1. I’m sorry. You again misstate the issues. Let’s all cry together about the cost of health coverage. Just try rationing, such as is practiced elsewhere, by withholding treatment from folks like NICE and as likely to result from IPAB because it is too expensive or there isn’t a good “return on investment”.

    Yes, health coverage spending is becoming a larger portion of total rewards – DESPITE the changes you identify:
    1. Higher premiums. While the nominal dollar amount is greater, many people pay contributions for single coverage that is not substantially greater (measured as a percentage of after tax take home pay) than it was 30 years ago.
    2. More high deductible plans. A high deductible plan of $1,500 is the same amount of point of purchase cost sharing, as a percentage of medical costs, as a $100 deductible 30 years ago. In fact, data show that American’s out of pocket spend as a total of medical services spend continues to be less than 15% – down from 50% in the 1960’s.
    3. Restrictions on Expensive Drugs. Sorry, the individual needs to do a cost benefit analysis here. Sovaldi is the poster child – where the cost of treatment is $84,000, but often results in a cure for Hepatitis C. Not sure why you criticize pre-auth or step treatment … isn’t it important to consider price – if only because of the portion to be paid by the patient? Don’t we have a ton of studies that show people will behave poorly when it comes to their treatment where they conclude the cost is “too high” for a benefit they may not be able to appreciate (blood pressure, etc.)?

    Who is to pay for the ever increasing cost of medical services – if not the insured/covered individual? Are you suggesting that employer health spend should become an even greater percentage of total rewards than it has in the past – further depressing wages and wage increases? Or, are you suggesting employer spend should increase as necessary – despite the likely impact on the prices for goods and services to consumers? Isn’t that a recipe for exporting even more jobs?

    Reminds me of my days as a benefits manager – people want the best coverage YOUR money will buy.

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    • Yes, employers should maintain a reasonable benefit as part of total compensation. The increases in premium cost-sharing combined with out-of-pocket costs is becoming a burden on the middle class and no, they don’t have the ability to significantly impact overall spending.

      My daughter just calculated that the changes her husband’s employer is making for 2016 amount to a $5,000 cut in take home pay. And of course, it’s not being made up in cash compensation.

      Employers are creating another crisis as they have done in the past which is going to result in a greater burden on them in the years ahead. High out-of-pocket costs are already becoming a political issue that will grow as the campaign proceeds. We didn’t do to employees what is being done today even back in the 1980s when medical inflation was several times the CPI.

      After all the rhetoric about affordable health care, we now see those costs for workers taking from the ability to save for retirement and more. It’s a net loss for workers.

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      • A $5,000 cut in take home pay means, for example, that the employer increased the employee’s contribution towards the cost of existing coverage by > ~$8,000 a year. Did the employer simply reduce their spend on health coverage by $8,000 a year and increase the employee’s spend by $8,000 a year – was this a cost shift? If so, I agree with you that this was a cut in rewards – and, I would encourage your daughter’s husband to look for another employer who is willing to pay him commensurate with his productivity/value.

        However, if all the employer did was suffer an $8,000 increase in the cost to deliver medical services to your daughter’s family, and the employer elected to pass through that cost to your daughter’s family, leaving the employer’s financial support for medical coverage unchanged, not sure why you criticize that result – since, obviously, the insurance company/plan sponsor now offers health coverage that is $8,000 a year more valuable (or at least $8,000/year more expensive). Did you think the employer should defray the ever increasing cost of health coverage from medical innovation, increases in utilization, price inflation, etc.?

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  2. I would love a 5% percent increase for 2016, where do I sign up. My premium increase is going to be 24% for 2016. My health insurance premiums have gone up 117% since 2011. I am in a HMO that was originally design as early treatment and prevention to reduce cost. I have had three doctors visits this year and I would not even do that if I didn’t need new scripts.

    The high deductible plan seems like it goes totally against the theory of an HMO. Gee, do I have an extra $150 dollars to get this lump check out or should I wait until I have the money? I do not have an extra $6,000 grand right now, I’ll put off seeing the doctor and then go to the emergency room if it is serious. I only see the high deductible plans as delaying treatment.

    Are the old BC/BS major medical plans still available? Those made sense to me. Some insurance coverage to help with unexpected doctor visits with major help to avoid bankruptcy for major hospitalizations.

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