By Michelle Andrews October
29, 2019
Everything
old is new again. As open enrollment gets underway for next year’s job-based
health insurance coverage, some employees are seeing traditional plans offered
alongside or instead of the plans with sky-high deductibles that may have been
their only choice in the past.
Some
employers say that, in a tight labor market, offering a more generous plan with
a deductible that’s less than four figures can be an attractive recruitment
tool. Plus, a more traditional plan may appeal to workers who want more
predictable out-of-pocket costs, even if the premium is a bit higher.
That’s
what happened at Digital River, a 650-person global e-commerce
payment processing business based in Minnetonka, Minn.
Four
years ago, faced with premium increases approaching double digits, Digital
River ditched its traditional preferred provider organization plan in favor of
three high-deductible plans. Each had different deductibles and different
premiums, but all linked to health savings accounts that are exempt from taxes.
This year, though, the company added back two traditional preferred provider
plans to its offerings for workers.
Even
with three plan options, “we still had employees who said they wanted other
choices,” said KT Schmidt, the company’s chief administrative officer.
Digital
River isn’t the only company broadening its offerings. For the third year in a
row, the percentage of companies that offer high-deductible plans as the sole
option will decline in 2020, according to a survey of large employers by the
National Business Group on Health. A quarter of the firms polled will offer
these plans, sometimes called consumer-directed plans, as the only option next
year, down 14 percentage points from two years ago.
That
said, consumer-directed plans are hardly disappearing. Fifty-eight percent of
covered employees worked at companies that offered at least one high-deductible
health plan in 2019, according to an annual survey of employer health benefits
released by the Kaiser Family Foundation last month. That was second only to
the 76% of covered workers who were at firms that offered a PPO plan. (KHN is
an editorially independent program of the foundation.)
When
Digital River switched to all high-deductible plans for 2016, the firm put some
of the $1 million it saved into the new health savings accounts that employees
could use to cover their out-of-pocket expenses before reaching the deductible.
Employees could also contribute to those accounts to save money for medical
expenses. This year the deductibles on those plans are $1,850, $2,700 and
$3,150 for single coverage, and $3,750, $5,300 and $6,300 for family plans.
The
company put a lot of effort into educating employees about how the new plans
worked, said Schmidt. Premiums are typically lower in high-deductible plans.
But under federal rules, until people reach their deductible, the plans pay
only for specified preventive care such as annual physicals and cancer
screenings and some care for existing chronic conditions.
Enrollees
are on the hook for everything else, including most doctor visits and
prescription drugs. In 2020, the minimum deductible for a plan that qualifies under federal rules for
a tax-exempt health savings account is $1,400 for an individual and $2,800 for
a family.
As
their health savings account balances grew, “more people moved into the camp
that could see the benefits” of the high-deductible strategy, Schmidt said.
Still, not everyone wanted to be exposed to costs upfront, even if they ended
up spending less overall.
“For
some people, there remained a desire to pay more to simply have that peace of
mind,” he said.
Digital
River’s PPOs have deductibles of $400 and $900 for single coverage and $800 and
$1,800 for families. The premiums are significantly more expensive than those
of the high-deductible plans.
In the
PPO plan with the $400/$800 deductible, the employee’s portion of the monthly
premium ranges from $82.37 for single coverage to $356.46 for an employee plus
two or more family members. The plan with the $2,700 deductible costs an
employee $21.11 for single coverage and the $5,300 deductible plan costs
$160.29 for the employee plus at least two others.
But
costs are more predictable in the PPO plan. Instead of owing the entire cost of
a doctor visit or trip to the emergency room until they reach their annual
deductible, people in the PPO plans generally owe set copayments or coinsurance
charges for most types of care.
When
Digital River introduced the PPO plans this year, about 10% of employees moved
from the high-deductible plans to the traditional plans. Open enrollment for
2020 starts later this fall, and the company is offering the same mix of
traditional and high-deductible plans again for next year.
Adding
PPOs to its roster of plans not only made employees happy but also made the
company more competitive, Schmidt said. Two of Digital River’s biggest
competitors offer only high-deductible plans, and the PPOs give Digital River
an edge in attracting top talent, he believes.
According
to the survey by the National Business Group on Health, employers that opted to
add more choices to what they offered employees typically chose a traditional
PPO plan. Members in these plans generally get the most generous coverage if
they use providers in the plan’s network. But if they go out of network, plans
often cover that as well, though they pay a smaller proportion of the costs.
For the most part, deductibles are lower than the federal minimum for qualified
high-deductible plans.
Traditional
plans like PPOs also give employers more flexibility to try different
approaches to improve employees’ health, said Tracy Watts, a senior partner at
benefits consultant Mercer.
“Some
of the newer strategies that employers want to try just aren’t [health savings
account] compatible,” said Watts. The firms might want to pay for care before
the deductible is met, for example, or eliminate employee charges for certain
services. Examples of these strategies could include direct primary care
arrangements in which physicians are paid a monthly fee to provide care at no
cost to the employee, or employer-subsidized telemedicine programs.
The
so-called Cadillac tax, a
provision of the Affordable Care Act that would impose a 40% excise on the
value of health plans that exceed certain dollar thresholds, was a driving
force behind the shift toward high-deductible plans. But the tax, originally
supposed to take effect in 2018, has been pushed back to 2022. The House passed
a bill repealing the tax
in July, and there is a companion bill in the Senate.
It’s
unclear what will happen, but employers appear to be taking the uncertainty in
stride, said Brian Marcotte, president and CEO of the National Business Group
on Health.
“I think
employers don’t believe it’s going to happen, and that’s one of the reasons
you’re seeing [more plan choices] introduced,” he said.
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