The Costliest Medical Conditions

Sun Life Financial studied the costliest medical conditions covered by its stop-loss insurance from 2012 to 2015. During the four years of the study, billed charges from medical care providers totaled $9 billion. Self-insured employers paid just over half ($5.3 billion) of those billed charges after discounts were applied and received $2.3 billion in reimbursements through stop-loss protection.

Million-dollar-plus claims increased 25% compared to the previous year. Less than 2% of million-dollar plus claimants (448) account for 18.5% of stop-loss claims reimbursements ($431.2 million). The average amount an employer paid on a claim above $1 million was $1.45 million, which was reduced to $491,000 after applying the average stop-loss claim reimbursement ($962,000).

Cancer dominates the top of the list (number one and number two) with $618 million in stop-loss reimbursements, accounting for 26.6% of stop-loss claims. Breast cancer accounted for 13.6% of cancer reimbursements. Cancer is also a leading million-dollar condition; it’s in the number-two spot after premature infant and live-born complications. The use of Intravenous medications was a key driver of rising cancer costs in 2015.

Chronic/end-stage renal disease (kidneys) held steady at number-three, accounting for over $369 million in combined first-dollar claims and stop-loss claims reimbursements. The average treatment cost for claims associated with kidney disease has gone down 21% over the last four years, the high incidence rate of the condition contributes to its ranking. One in three Americans is at risk for kidney disease, with diabetes and hypertension as leading causes.

Transplants were number-six with a 65% increase in incidence from 2012 to 2015. There has been an expanded use of transplants and an increase in organ donations and improved procedures, which can increase the pool of transplant candidates. Transplants represented over $62.2 million in stop-loss claims. There was a 79% increase in bone marrow/stem cell transplant costs and a 55% increase in associated pre- and post-transplant costs. The costs to treat a catastrophic condition were higher in certain regions of the United States: 27% higher in East South Central, 22% higher in the Mid-Atlantic, and 19% higher in the Pacific regions.

Study Reveals Leading Healthcare Benefit Trends

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The Healthcare Treds Institute issued a massive survey of employee benefit trends. The good news is that employers are looking to insurance brokers and benefit consultants to help them evaluate health benefit designs and distribution models. Forty percent of employers say they will depend on insurance brokers to learn about new health benefit models, such as defined contribution plans and private exchanges, and 31% will depend on benefit consultants. Nearly 40% rely on insurance brokers to learn about health benefit designs and platforms.

“The ACA has created a dynamic marketplace in which brokers have a front row seat navigating in this new era,” according to the study. Human resource professionals have new responsibilities due to the ACA. Thirty percent are looking for help from benefit consultants. However, 30% are researching independently compared to 26% in the previous year. Employers gave the following answers to this question, “What partners would you depend on to help you learn about new health benefit designs and distribution models?”

  • Insurance broker 39.7%
  • Will research independently 30.8%
  • Benefit consultant 30.8%
  • Insurance carrier 24.4%
  • TPA 19.2%
  • None 15.4%
  • Trade Association 11.5%
  • Payroll company 10.3%
  • Other 5.1%

What Benefits Employers Are Offering

About 40% of employers offer three or more health plan options, which are usually a PPO, an HDHP, and an HMO. Employees are choosing HDHPs (39%) over HMOs (35%). The following is a breakdown of benefits that employers offer:

  • PPO 59.5%
  • Flexible spending account (FSA)59.5%
  • Health savings account (HSA) 52.1%
  • High deductible health plan (HDHP) 38.8%
  • HMO 34.7%
  • Self-insured plan 22.3%
  • Health-reimbursement arrangement (HRA) 15.7%
  • Catastrophic insurance 8.3%
  • Dental plan 73.6%
  • Vision plan 67.8%
  • Prescription drug coverage 67.8%
  • Mental health coverage 52.1%

How Healthcare Reform Has Affected Employee Benefit Packages

Forty-nine percent say that healthcare reform will increase employee cost-sharing; 39.6% say it will increase premium contributions, and 3.6% say it will shift their company towards a defined contribution plan. Employee cost-sharing has risen every year for 10 years. Employers and the medical industry have had to deal with other ACA implications, such as the employer mandate and new compliance, which has caused an increase in capital and human resources. Employers have done the following in response to health reform:

  • Increased employee cost sharing 49%
  • Has had no effect 30%
  • Enhanced wellness/preventive health programs 23%
  • Increased employee engagement in their health 19%
  • Increased employee engagement in reducing healthcare costs 18%
  • Adopted new wellness/preventive health programs 17%
  • Reduced covered benefits 15%
  • Added HDHPs/CDHPs 14%
  • Stopped offering healthcare benefits 9%
  • Shifted to a defined-contribution plan

The Cadillac Tax

The impending 2018 Cadillac Tax is a prevalent challenge for employers. The ACA 40% excise tax will be imposed on the portion of group health plan premiums that exceed specified thresholds. The concern may be more regional since it could be triggered in parts of the country where healthcare costs are high and less likely to be triggered in parts of the U.S. with below average healthcare costs. Thirty-five percent of employers are very concerned about the 2018 Cadillac Tax; 25% are somewhat concerned; and 30% are not concerned. Sixty-one percent are making no changes to their benefits in light of the impending Cadillac tax while 18% have changed plans to avoid the Cadillac Tax. Recent news reports along with lobbying efforts may be influencing the 61% of companies who have a wait and see approach about the Cadillac Tax.

Defined Contribution Plans

Employers continue to learn more about defined contribution plans and private exchanges with about 35% saying they are familiar with them. This is an increase of about 5% over last year. Twenty-eight percent say that exchanges help employees understand the value of their benefits. Twenty-five percent say that a defined-contribution plan would help employees understand the value of their benefits and make more cost-conscious benefit decisions.

Five percent of employers offer defined-contribution plans (not on a private exchange) while same offer defined-contribution plans on a private exchange. Also, 7% are considering offering a defined contribution plans on a private exchange while 53% have not explored defined contribution plans.

Fifty-five percent of employers who are considering a defined-contribution plan, say they would explore the option for 2017 or 2018. This suggests that near-term adoption will be gradual. But the adoption curve may steepen as the benefits of defined-contribution plans become better known.

Private Exchanges

Employers want private exchanges to provide many solutions including health spending accounts (62%), carrier integration (58%), COBRA compliance (56%), automation of premium payments (51%), and payroll integration (50%). Employers choose private exchanges to control costs and increase employee choices, which is why employers say, most often, that they are looking for health spending accounts. Incorporating consumer directed healthcare coverage, such as HDHPs, HSAs and HRAs, helps private exchanges create a competitive marketplace that promotes cost-savings for employees and employers.

To succeed a private exchange needs to provide broad choices and help participants in the selection process. Sixty-two percent of employers say that it is somewhat important to very important to have health-spending accounts in an insurance exchange. Also considered somewhat important to very important are carrier integration (59%), COBRA compliance (56.4%), and premium payment automation (53%). Employers say they would choose the following offerings in an exchange:

  • Plan and cost comparison tools 80%
  • Online capabilities 69%
  • Combined benefit enrollment 47%
  • A help line 47%
  • Transparency solutions for treatment cost comparisons 45%
  • Mobile applications 45%
  • Progressive cost tracking tools 35%
  • Consolidated employer billing 35%
  • Integrated consumer healthcare accounts 30%
  • Financial account options 28%

Employers rank several exchange features as important, such as being a private exchange instead of a public exchange (83%), having a large selection of plan choices at targeted benefit levels (58%), and being provided by their broker or benefit consultant (55%). These findings indicate that broad choice is more important than who runs the exchange (broker versus carrier).

Wellness

Wellness programs continue to gain interest as 35% of employers have initiatives in place compared to 30% last year. Another 22% are considering implementing a program. Sixty-five percent are considering adopting a wellness program in 2017, and 16% are considering adopting one by the end of 2016.

Fifty-five percent of those offering wellness programs, offer an employee-assistance program (EAP); 53% offer flu shots or vaccinations; and 37% offer a smoking cessation program. The disease management tools that most employers offer are for diabetes (30%) and depression or other mental health (30%). Fifty-four percent of employees are not offering disease management tools. But 30% are providing services for diabetes and mental health conditions. To promote positive health outcomes, 44% of employers offer at least one wellness program; 31% offer biometric screening; and 20% offer a disease management program.

Forty-four percent have at least one wellness initiative in their workplace. Employers that are interested in offering wellness plans should consider how it would affect productivity, absenteeism, turnover, retention, and recruitment, according to the survey authors. Including these factors in the ROI discussion can help demonstrate additional savings a company could achieve.

When it comes to wellness incentives, HSA and HRA contributions (18%) and premium reductions (16%) are most popular. Companies are split on whether to offer wellness incentives with 58% not providing rewards to employees and 42% offering some type of incentive in varying monetary amounts to participate. The value of the incentives remains relatively modest. Companies interested in wellness incentives can use the ACA as a guide. Eighteen percent offer $250 or more of incentives to employees for health-related tasks. Common values of incentives are $101 to 250 and $1 to $50. For more information, visit www.HealthcareTrendsInstitute.

Enrollment in Self-Insured Companies Up Significantly

More than 97 million people are covered by administrative services only (ASO) agreements with health insurance companies (as of June 2012), compared to 84 million who are covered by commercial fully insured risk arrangements, according to a study by Mark Farrah Associates.

ASO enrollment increased nearly 5% from June 2011 to June 2012. Enrollment in commercial fully insured products declined 0.4% during the same period. Driving these trends are health care reform, the economy, and the fact that ASO options that have become more readily available for small to mid-size employers. However, defined contribution health plans may affect the overall outlook for Third Party Administrator (TPA) and ASO business.

Health insurance carriers and their subsidiaries provide most of the administrative services for enrollment covered under TPA agreements for health benefits. ASO business is expected to continue to rise through 2013. But, this may change in 2014, if a large number of employers pursue defined contribution health plan options, if the costs of reinsurance and stop-loss coverage rise, or if state and local government regulations change regarding self-insured business.  For more information, visitwww.markfarrah.com.

Last Updated 10/20/2021

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