Study: Premiums drive consumer selections in ACA marketplaces

Consumers purchasing coverage from Affordable Care Act health insurance marketplaces are gravitating toward the cheapest plans, and healthy consumers in particular are shopping for the lowest prices, while those selecting higher-cost plans that tend to allow more provider choice have been sicker than anticipated. A federal analysis shows two-thirds of American consumers bought the lowest- or second-lowest-cost coverage in each tier in 2014, and about 50% purchased the cheapest plans last year.

The New York Times (free-article access for SmartBrief readers) (8/12)

Americans Are Not Confident About Their Approach to Saving and Investing

Many participants in defined contribution plans are not confident in their approach to saving and investing, according to a study by J.P. Morgan Asset Management. There is a disconnect between participant intent and action. Also, a misconception about participant support for automatic features and strategies may be holding plan sponsors back from strengthening their defined contribution (DC) plans. The survey of 1,001 DC plan participants finds that most are still uncertain that they will have a financially secure retirement. More immediate financial demands interfere with their ability to save for the future; many don’t have a clear understanding of how to set a retirement savings goal; and most are not confident in their ability to make investment decisions.

Sixty-eight percent say that their 2015 contributions were less than they should have been. Eighty-one percent are interested in doing financial planning for retirement. Forty-five percent do not have a financial plan. Forty-eight percent say they don’t spend enough time planning for retirement. Twenty-eight percent have never rebalanced their 401(k) account, 31% never changed their initial choice of investment options, and 18% never increased their contribution.

Catherine Peterson of J.P. Morgan said, “Plan sponsors have an opportunity to strengthen their plans and help provide…catalysts for transforming intent to action…This can be done through automatic…strategies, such as automatic enrollment, automatic contribution escalation, and re-enrollment with a qualified default investment alternatives, such as a target date fund.” The survey also reveals the following:

  • 74% favor automatic enrollment and automatic contribution escalation or are neutral about it.
  • 67% favor a combination of these two features or are neutral.
  • 90% like target date funds.
  • 82% favor re-enrollment or are neutral.
  • 96% of those who enrolled automatically in their plans are satisfied, and 31% would not have enrolled without automatic enrollment.
  • 97% of those with contribution amounts that increase 1% to 2% automatically each year are satisfied; and 15% say they probably would not have escalated their contributions without the automatic feature.
  • 73% of those who went through a re-enrollment allowed their assets to be moved to a target date fund. Also, 99% of those whose funds were moved are satisfied.

Wellness Plans Need More Personalization

The keys to maximizing a wellness plan is to offer personalization, provide rewards, and understand what employees want, according to a survey by Welltokget and the National Business Group on Health. The study, which is based on the responses of over 1,000 full-time employees at large companies, reveals the following:

  • 81% say their company wellness plan has improved their physical well-being.
  • 60% say that including family in wellness programs is likely to increase participation.
  • 37% of those who did not participate in the company’s wellness program did not find it relevant to them, and 20% didn’t know it was available.
  • 78% of those earning $200,000 more would engage in healthier behaviors if they got rewards as would 98% of all employees under 35 and 85% of those over 55.
  • 86% said the top motivators for improving their health came from colleagues, followed by their direct manager (57%).
  • 64% of Millennials said that their direct manager influenced them to improve their health compared to 51% of those 55 and older.
  • 24% of Millennials said HR influenced them to improve their health compared to 40% of those 55 and older.
  • 63% of households making less than $50,000 want employers to play a role in their financial well-being compared to 44% of those making $200,000 or more.
  • 60% of participants from 18 to 34 say that employers should be involved in financial health compared to less than half of those 45.
  • 58% of women say employers should play a role in employees’ financial health versus 48% of men.
  • 77% of employees say that their employers should play a role in helping them get cost effective care.
  • 74% say the employer should provide emotional/personal support resources.
  • 53% say employers should play a role in helping them stop unhealthy behaviors.
  • 53% say employers should help them manage financial issues.
  • 24% participate in emotional health benefits.
  • 37% participate in financial security programs.
  • 48% of employees participate in programs to help them improve their physical health.

Brian Marcotte, CEO and president of the National Business Group on Health said, “It is clear that employees can benefit from employer-sponsored programs aimed at improving physical, financial and emotional health, along with decision support resources to maximize their health care experience. The one size fits all approach to communications has proven ineffective in engaging employees and engagement is now the number one challenge facing employers. Personalization is the key. Emerging engagement platforms…shows great promise…by leveraging data, predictive analytics, and technology to reach people with personalized, timely, relevant, and actionable information.” For more information, visit

Hospitals Are Seeing Fewer Acute Patients

Rural hospitals that have higher volumes of less-acute patients, saw a 3.7% drop in year-over-year admissions (and 0.7% growth in admissions adjusted for outpatient activity), according to a report by Fitch. Payors are exerting pressure to reduce short-stay admissions and re-admissions; high-deductible health plans encourage patients to seek care in less expensive settings outside of the acute-care hospital; and technological advances allow more complex cases to be handled in outpatient settings.

The Cost Implications of Private Exchanges

Private exchanges could encourage employees to select less-generous plans, according to a report by Rand. This could expose employees to higher out-of-pocket costs, but premium contributions would drop substantially, so net spending would decrease. On the other hand, employee spending may increase if employers decrease their health insurance contributions when moving to private exchanges. Most employers can avoid the ACA’s Cadillac tax by reducing the generosity of their plans, regardless of whether they move to a private exchange. There is not  enough evidence yet to determine whether private exchanges will become prominent and how they will affect employers and their employees.

Workers who choose less-generous plans could risk higher out-of-pocket costs. But their net spending would drop because premiums would drop substantially. Average employee spending could increase if employers lower their health insurance contributions when moving to private exchanges. Private exchanges are unlikely to significantly affect the ACA’s Small Business Health Options Program (SHOP) Marketplaces.

401(k) Plans Don’t Get Reviewed Often Enough

A study by MassMutual reveals that many financial advisors don’t review retirement plans as often as many sponsors want. Fifty-seven percent of plan sponsors want advisors to help them review their retirement plans semi-annually or more often, but only 44% of sponsors say their their advisors do so. However, sponsors who rely on advisors typically review their retirement plans more often than those who don’t use an advisor.

Also, reviews often miss what’s most important. Tom Foster Jr. of MassMutual said, “Frequent, focused plan reviews are essential to…help ensure that plan participants are saving enough to retire when they reach their traditional retirement age. It’s a clear opportunity for financial advisors to improve and build their retirement plan practices.” Foster said, “Only one in four sponsors reviews its plan to determine whether employees are saving enough to retire…Any improvements to a plan should generally start with a careful review, and include consultation with plan legal counsel and other experienced advisors.”

During plan reviews, sponsors who work with an advisor typically prioritize satisfaction with their plan provider. Sponsors without an advisor prioritize fees and costs. Foster said, “Advisors can do a world of good to help employers focus on savings, the effectiveness of educational programs, and…whether their employees are on target to be retirement ready. Participation in the plan is certainly important too. If every employee participates, but each saves only 1% of his or her salary, it’s totally ineffective as no one will ever be prepared to retire.”

Groups Says that Divestitures Don’t Keep Medicare Advantage Competitive

Requiring companies to divest does not maintain competition amid health insurance mergers, according to an issue brief by the Center for American Progress. (Competition authorities frequently require merging parties to divest a number of brands or operations in order to clear a proposed merger.) The Center says that divestitures don’t restore competition with Medicare Advantage plans. Also, seniors pay higher premiums for divested plans. By 2015, acquiring partners exited more than half of the affected counties. Only two of the 15 divested plans are offered, and premiums increased an average of 44% for more than half of the divested plans. Researchers at the Center say that divestitures in the proposed Aetna-Humana merger won’t be successful in maintaining competition and protecting seniors. In fact, the proposed Aetna-Humana merger would greatly reduce market competition for Medicare Advantage beneficiaries. In markets where Medicare Advantage beneficiaries have a choice of insurers, Aetna’s average annual premiums were lowered by as much as $302 and Humana’s annual premiums were lowered by as much as $43. Under the merger, premiums could increase beyond these amounts because of the greater market power of the combined company.

Study: Effective wellness plans need culture of health, good communications

A corporate culture of health and a good communications strategy are needed for effective employee wellness programs, according to a study in the Journal of Occupational and Environmental Medicine. Researchers said creating a culture of health required a supportive environment and employee engagement. “In the companies we visited, healthy options were accessible and easy to adopt,” the authors wrote. Safety + Health magazine online (2/23)

Retirement plans key to millennial saving, poll indicates

Only 43% of millennials without access to a retirement plan via work say they are consistent in saving for retirement, compared with about three-fourths of millennials who have access to such a plan, a poll by Young Invincibles found. MarketWatch (2/17)

Last Updated 05/25/2022

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