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Open Enrollment: Help Younger Workers Understand Their Coverage

A new study’s findings that many workers have a poor understanding of their employer-sponsored health insurance benefits, presents an opportunity for businesses to extend targeted support to staff during open enrollment.

The “2023 Optavise Healthcare Literacy Survey” found that 32% of employees are not confident about understanding how their plan works, meaning that many of your staff may have trouble finding, understanding and using information and services to make health insurance decisions.

As the plan sponsor, you can step in to help them during open enrollment by providing them with tailored information and guidance.

Employees who don’t understand their coverage may choose plans that are not right for them, and because of their lack of knowledge, they are more likely to stick with the same plan and not explore other options during open enrollment.

To help your staff who may not be as up to speed on how their health plan works, your human resources team has a few options.

Focus on younger workers

The Optavise study found differences in health insurance understanding among the various generations in the workforce, with millennials and Gen Z workers having the poorest understanding of health insurance terms.

The study authors recommend a return-to-basics approach during open enrollment for these workers. That could include holding meetings for them to explain the basics of health insurance, particularly how plans with higher premiums will typically have lower deductibles and copays, while low-premium plans usually have higher deductibles and copays.

Also, if you have a multi-generational workforce or workers with chronic conditions, you’ll want to tailor your pitches depending on the employee. Your presentations should focus on multiple scenarios that explain which options are best, depending on your workers’ age, health and life circumstances.

One-on-one communications

The study found that workers don’t often turn to their employers first when they have questions or need information about health insurance or their health plans:

46% said they reached out to friends and family for information.
35% taught themselves about terms and processes by going online or reading other materials.
27% sought out information from their company’s HR department.

Given the often-poor accuracy of information from online sources, and that their friends and family likely aren’t experts on the subject, it’s a good bet that many people are getting bad information about health insurance.

While group training and providing online tools and printed material can help your workers, one-on-one meetings seem to be the most effective in helping workers:

84% reported they found one-on-one sessions very or extremely useful.
68% said online resources were very or extremely helpful.
Only 49% found e-mail correspondence was very or extremely helpful.

You may want to urge your employees to schedule face-to-face meetings with relevant HR staff. One-on-one meetings let your employees ask specific questions. By having conversations about their current medical needs or family situation, employees can best determine the most reasonable option for them.

Focus on points of confusion

The study also asked workers what kind of information about their group health plans they wanted to know more about. The following answers provide a list of topics you may want to cover during open enrollment meetings:

How to avoid surprise medical bills.
How my deductible, copay/coinsurance and out-of-pocket maximum work, and what it means for my wallet.
How to review an Explanation of Benefits and medical bill for errors.
Researching health care costs, and why it matters.
How to choose where to get care.
How to choose a plan.

The takeaway

You can play an important role in educating your workers about their health coverage.

Smart employers will tailor their benefits communications, literature and meetings to meet the varying needs of their workers. It’s good to provide materials and education through various sources like a portal and literature, meetings — and in particular one-on-one meetings, which are seen as the most effective.

A personal approach can be especially helpful to ensure that your workers choose plans from which they will benefit the most in light of their budget and needs.

Retaliation Accounts for 35% of All EEOC Complaints

The Equal Employment Opportunity Commission is seeing a wave of retaliation complaints by employees. Retaliation charges accounted for more than 35% of all charges filed with the commission in fiscal year 2022.

Retaliation means any adverse action that you or someone who works for you takes against an employee because they complained about harassment or discrimination. Any negative action that would deter a reasonable worker in the same situation from making a complaint qualifies as retaliation.

Employees who participate in an investigation of any of these problems are also protected. For example, you cannot punish an employee for giving a statement to a government agency that is looking into a discrimination claim.

Employment law attorneys say that the increase is in part because employees who sue for retaliation have a higher degree of success than those who bring a regular discrimination charge. It’s important that all employers train their managers and supervisors to not retaliate against workers making complaints, as the result can be a costly lawsuit.

Thanks to a precedent-setting case, Burlington Northern & Santa Fe Railroad vs. White, while an employee alleging discrimination must prove that they suffered a “materially adverse employment action,” a retaliation plaintiff only needs to show that the employer undertook some action that may dissuade them from making or supporting a charge.

Employment law experts recommend that employers do the following:

Set clear and unambiguous policies

Your company policy should clearly state that retaliation is not permitted.
The policy should describe the parameters of inappropriate conduct as well as you can define them.
Put the policy in writing.
Set reporting and grievance procedures, including the person to whom the employee can report a retaliation complaint.
Have staff sign an acknowledgment of receipt of your policy.

Investigate complaints promptly

Remember that anyone who participates in an investigation is likely protected from retaliation (not just the employee who makes a complaint, but witnesses as well).
Communicate results of the investigation to the grievant.
Take effective remedial measures, including carefully reviewing all disciplinary measures before imposing them. You should also ensure that disciplinary actions are consistent with past practices.

Train managers and supervisors

Finally, you should train managers and supervisors and ensure they understand your policies.

Make sure they understand who is protected from retaliation (participants, complainants, and even persons related to the complainant in some cases).

They should also understand what constitutes retaliatory conduct and, if they are unsure, they should speak to your human resources manager.

How to Handle Spousal Coverage for Your Staff

While the Affordable Care Act requires employers to offer coverage for employees’ adult children until the age of 26, it does not require them to offer coverage to their workers’ spouses.

As employers try to balance the costs of offering health coverage, spousal coverage is often on the table for cutting when making cost decisions. Many employers view offering spousal coverage as a way to keep up morale and serve as a recruitment and retention tool, but others consider the option a burden.

Cutting it out completely though is often a bitter pill for many employees to swallow, particularly if their spouse’s employer doesn’t offer coverage or if they don’t work. And if they are forced to go to a public insurance exchange, their bitterness could deepen further. What’s required is a diplomatic solution.

Instead of cutting it out completely, employee benefits experts suggest one of two ways to deal with the spousal coverage dilemma and reduce costs at the same time: a spousal carve-out or a spousal surcharge.

1. Spousal carve-out

With this approach, the employer defines plan eligibility so that spouses are ineligible to participate if they are eligible for coverage at their own employer. As an employer, you need to consider the following if this is the way you want to go:

Will eligibility for any type of employer-sponsored coverage make the spouse ineligible? What if the spouse is only eligible for an employer-sponsored “mini-med” plan or other limited plan coverage?
Is the cost of the other employer-sponsored coverage a factor in determining eligibility? One common approach is to make the spouse ineligible for the plan only if the spouse’s cost of the other employer-sponsored coverage is less than a certain dollar amount.

Creative approach: Create a spousal carve-out program with an escape hatch that allows the spouse to remain on your plan if the price the spouse would have to pay for coverage under his or her own employer’s plan exceeds a specified threshold.

2. Spousal surcharge

Charging a surcharge for spouses who are eligible for coverage at their own employer provides an incentive for spouses to choose to enroll in the other coverage, while still allowing eligibility in the employer’s plan for those who need it.

That said, this approach is an extra level of complexity in the communication and administration of benefits and payroll.

Creative approach: You can use a carrot instead of a stick. That is, give a monetary award to employees whose spouses switch from your plan to the spouse’s employer’s plan.

Verification

There are three ways to verify if a spouse has coverage through their employer:

Employee affidavit. Your employee signs a statement certifying that his or her spouse is ineligible for other employer-sponsored coverage.
Certification from the spouse’s employer. Have the spouse’s employer provide a letter stating that they are ineligible for health coverage. This approach may be difficult if the employer is not cooperative.
Eligibility audits. You can do spot-checking of employee spouses’ lack of access to coverage by randomly picking staff members and contacting each spouse’s employer, rather than seeking verification in every case.

Diabetes Wellness Programs Can Boost Productivity, Reduce Costs

Physicians and employee health experts are increasingly recommending that employers include diabetes screening, prevention and management in their company-sponsored wellness programs.

Diabetes — known as the “silent killer” — afflicts more than 29 million Americans, or 9% of the population.

Type 2 diabetes — or adult-onset diabetes — accounts for about 90% to 95% of all diagnosed cases of diabetes. Type 2 diabetes is associated with older age, obesity, family history of diabetes, history of gestational diabetes, impaired glucose metabolism, physical inactivity, and race/ethnicity.

The fallout from the disease has a significant impact on businesses as it can lead to stress, depression and a number of other health problems, including cancer, stroke and heart issues. That in turn leads to lost productivity for you as well as presenteeism, or the dilemma of a worker being at work but not being productive.

Medical costs and costs related to time away from work, disability and premature death that were attributable to diabetes totaled $245 billion in 2019, according to the U.S. Centers for Disease Control. Of that total, $69 billion was due to lost productivity.

With these statistics in mind, it’s imperative that employers help their workers manage their diabetes. Helping them get diabetes under control or helping them avoid developing the disease can keep your productivity strong, reduce your workers’ comp claims and also chip away at your health insurance expenses thanks to lower premiums.

Diabetes means decreased productivity

Of the roughly $69 billion that U.S. employers lost in 2019 from decreased productivity due to diabetes:

$21.6 billion was from the inability to work as a result of diabetes.
$20.8 billion was from presenteeism.
$18.5 billion was from lost productive capacity due to early mortality.
$5 billion was from missed workdays.
$2.7 billion was from reduced productivity for those not in the labor force.

Prevention and management

Employers can help by providing their employees with a voluntary diabetes management and prevention program. This wellness benefit can take many forms.

The Integrated Benefits Institute during an annual forum recently held a session highlighting what some employers are doing to educate their workers on how to manage diabetes:

The San Francisco Municipal Transportation Agency has partnered with the American Diabetes Association to deliver educational seminars on diabetes to its workforce.
The agency also offers as part of its diabetes program health risk and orthopedic assessments, glucose and cholesterol screenings, nutritional counseling, exercise classes and a walking club. (Since the transport agency’s wellness plan provider initiated the diabetes program, its workers’ comp claims have also fallen.)
Caterpillar, Inc. found diabetes to be one of its primary cost drivers, so it now provides incentives for employee risk assessments and care management. For example, half of the employees in its diabetes management program reduced their A1C levels (a measure of diabetes control), while 96% reported measuring these levels regularly and 72% reported meeting recommended activity levels.
The City of Asheville, NC, used local pharmacists to coach employees on how to manage diabetes. More than 50% of those in the program experienced improved A1C levels, and the number of employees with diabetes that achieved optimal levels increased.
Vanderbilt University expanded a pilot program of intensive exercise and nutrition that helped employees with diabetes improve cholesterol and blood sugar. About 25% of the employees were able to stop taking their diabetes medications.
The Ohio Police and Fire Pension Fund works with its health insurer to offer its employees access to diabetes prevention and control programs. Employees voluntarily participate in worksite health screenings. Those who have pre-diabetes can attend YMCA-led diabetes prevention programs either at work or in the community.

The takeaway

Having a diabetes wellness program among your voluntary benefit offerings can help your employees avoid diabetes or manage it if they already have the disease. That helps not only their health, but also your bottom line.

If you would like to know more about educating your employees about diabetes and helping those with pre-diabetes or diabetes manage their condition, call us.

More Providers Charge for Telemedicine, Phone Visits and Doctor E-Mails

More hospitals and insurers have started charging patients for virtual care services as they have grown in usage and providers are spending more time meeting patients in telehealth appointments and responding to their e-mails.

Many hospital systems have started billing patients for e-mails they send to their physicians and, depending on the level of out-of-pocket expenses in their plan, they may pay just a few dollars for a copay or up to $100 if they have a high deductible.

With these forms of communication growing in use, employers may want to remind their employees to look at their plans’ benefits summaries to see how much they will have to pay for these services.

The hospitals argue that physicians spend a significant amount of time responding to inquiries and it takes just as much time for them to conduct telemedicine and phone appointments as it does in-person visits.

A short five-minute session with a patient on a phone or video appointment will typically result in associated work, including reviewing the patient’s chart, updating notes and putting in orders for medications, tests or referrals.

Billing under insurance

The Centers for Medicare and Medicaid Services introduced Medicare billing codes for telemedicine in 2019, paving the way for providers to allow patients to seek reimbursement for messages their doctors send them using an electronic portal.

Under the rules, a provider can bill for a message only if it’s in response to a patient inquiry and requires at least five minutes of the doctor’s time.

Many of the country’s health insurers have followed Medicare’s lead, reimbursing hospitals for doctors’ e-mails. In turn, insurers may charge patients a copay or they may have to pay for the service fully if they have a deductible they must first meet. Even then, fees for these types of appointments are typically lower than for in-person visits.

It should be noted that there may not be fees associated with some services such as asking a doctor for a prescription refill or follow-up care.

How it’s being billed

The amount that patients are being billed varies among hospital systems and insurers.

According to recent surveys, out-of-pocket telemedicine visits are an average of $30-75 nationally, with most visits at around $40-50. According to Becker’s Hospital Review:

Medicare pays around $50 per televisit on average.
Mayo Clinic started charging $50 for some online emails written by its doctors after a surge in mail volume.
Humana’s health plan On Hand charges $0 to $5 per visit.
Walmart offers its employees $4 telehealth appointments.
SSM Health, a hospital system in St. Louis, charges $25.
Summa Health, a hospital system in Akron, Ohio, charges $30.

The takeaway

Hospitals and providers are all charging different amounts for televisits, phone visits and their doctors sending e-mails. As well, insurers have different cost-sharing structures for their enrollees.

It’s important that you warn your employees to read plan summaries of these costs if they are regular users of these services, as health plan coverage will vary depending on deductible and copay levels. Doing this can help them avoid surprise bills, particularly if they have grown used to paying nothing for such services.

Identify Your Workers’ Needs, Consider Costs before Open Enrollment

It’s almost time for group health insurance open enrollment and your top priority should be to drive participation by helping your employees make informed decisions about their options.

You’ll want to help your staff understand all of their options so they can choose plans that are best for their age, health and life situation.

This is an important exercise to ensure that any of your workers don’t pick a plan that costs them too much in premium if they rarely use their health insurance, or costs them too much in out-of-pocket expenses if they are frequent users of health care.

It’s a balancing act, since each employee has different needs. Here’s our advice for the open enrollment:

Listen to your workforce

Before you make any decisions, you should listen to your employees and better understand their needs and preferences.

With answers and feedback in hand you can create a benefits package that is more appealing to them, which in turn gives you a competitive edge when attracting and retaining workers.

Engage employees and solicit feedback through quarterly employee-benefits round table meetings. Invite employees from different age groups and different departments to participate in these meetings, to ensure you have a good cross-section of your staff represented.

Give advance notice

You can start now with simple reminders for them to start thinking about open enrollment and evaluate their current health plans. Send out memos and place posters in high-traffic areas.

If you start with this in September or October, they can have time to assess their options, particularly if anything has changed in their lives like marital status, new children or health issues.

Costs are paramount

You can work with us to settle on plan arrangements that will be within your and your employees’ budgets, and that comply with the Affordable Care Act’s affordability and minimum value rules.

Employees have a right to understand the costs they’ll be facing in each plan, including:

Their share of the premium,
Their deductible,
Their copays or coinsurance, and
Other out-of-pocket expenses.

Typically, the higher the premium on a plan, the lower the employee’s out-of-pocket costs are. The lower the premium on the plan, the higher the deductible and copays.

Get an early start

If your plan year starts Jan. 1, you should hold open enrollment meetings and dispense plan materials in October or November.

This will give your workers time to review all of their options and compare costs and coverages.

Communicate effectively

Your task is to get employees out of cruise control and truly assess all of their options.

This is especially true if you are making changes to cost-sharing, introducing new plans, or offer voluntary benefits, a wellness plan or health savings account or flexible spending account.

You should use a variety of different media to communicate with them. Use video, virtual and live meetings, e-mail communications, text messages and print materials to get through to your employees. Each generation will often have a preferred medium, so using a multi-pronged approach may be most effective.

Get spouses involved

If you also offer insurance to your workers’ families, you should communicate through your employees that their spouses are also invited to join your open enrollment meetings.\

You may also invite them to view any electronic material you may post online, like the aforementioned videos.

If they cannot make a general meeting, you can invite them to come in to meet with your human resources manager if they have questions.

Remind staff of the ACA

You can use open enrollment as a way to remind your workforce of their responsibilities to secure coverage under the ACA.

Let them know that employees that refuse coverage that complies with the ACA from their employer and opt to purchase it on a public exchange, will usually not be eligible for government premium subsidies.

The meeting

Send out meeting notices early to give your employees time to prepare and set aside time.

Try to make the meeting engaging with props, videos, printed materials and more. You may also want to consider recording the session so that staff who can’t make the meeting can watch it, particularly if you have employees that don’t work on-site.

Provide enough time for the main presentation, as well as for questions from your employees.

The takeaway

Open enrollment can be a hectic and stressful time for both the employer and workers. By getting a head start on planning and communications, you will be ahead of the game and your employees won’t feel harried into making a decision. That benefits both them and your organization.

More Insurers Scale Back on Prior Authorizations

Some of the nation’s largest insurers have announced plans to roll back their prior authorization requirements for medical services, and some are doing this in their Medicare Advantage plans as well.

The moves come as states and the Centers for Medicare and Medicaid Services are implementing rules that aim to streamline prior authorizations for Medicare Advantage plans.

Prior authorization — or prior approval — has always been a thorn in the side of patients, often keeping them from accessing care in a timely fashion. The moves by these insurers come after the CMS announced earlier this year that it would require health insurers to automate prior authorization and return decisions more quickly.

These developments are good news for Medicare Advantage enrollees and should improve their health care experience and access to timely care. Many of these changes took effect immediately and some will start in 2024.

While original Medicare, including Part A, rarely requires prior authorization, Medicare Advantage plans, which are often preferred provider organizations and health maintenance organizations, may require it for certain procedures.

Under prior authorization, doctors and other health care providers must obtain advance approval from a health plan to qualify for coverage before they deliver a specific service to the patient. Health insurers have lists of services that require prior approval, in order to control their costs.

Nearly all Medicare Advantage enrollees (99%) are in plans requiring prior authorization. Often, the prior authorization is for more expensive services, such as an MRI or being transferred from a hospital to a skilled nursing facility.

In 2021, 6% — or 2 million Medicare Advantage prior authorization determinations — were denied, according to a report issued by the Kaiser Family Foundation in February 2023.

What insurers are doing

Here are what a few of the nation’s largest health insurance players are doing:

Cigna — In August 2023, Cigna announced with immediate effect that it would no longer require prior approvals for nearly 25% of medical services, and it plans to cut another 500 or so codes that require prior authorization for its Medicare Advantage plans before the end of this year.

UnitedHealthcare— UnitedHealthcare, starting in Spring 2023 and lasting through the end of the year, aims to eliminate almost 20% of its current prior authorizations. It also plans to eliminate a code for cardiology stress test prior authorization for Medicare Advantage members, eliminating the need for some 316,000 prior authorization requests a year.
Aetna — In 2022, The insurer rolled back prior authorization requirements on cataract surgeries, video EEGs and home infusion for some drugs. Aetna said that it had also reduced automated prior authorizations by more than 10% in 2022, with plans to more than double that this year, according to press reports.

States, regulators taking action

Three states — Louisiana, Michigan and Texas — already have “gold card” laws on their books that except from prior authorization rules certain doctors whose requests are routinely approved. This year, another 24 states have introduced similar legislation, according to a report by the Wall Street Journal.

Meanwhile, in April 2023, the Biden administration implemented a final rule designed to ensure people with Medicare Advantage plans get access to the same necessary care — prescriptions, medical tests, equipment and procedures — as they would receive in traditional Medicare.

The new rules, which require that plans automate their prior approval procedures, are slated to take effect in 2024. The final rule also requires that approval of a prior authorization request for a course of treatment must be valid for as long as medically reasonable and necessary to avoid disruptions in care.

The new rules would also prevent patients from having their medical care discontinued just because they’ve switched Medicare Advantage plans or moved from traditional Medicare to Medicare Advantage.

EEOC Posts New Guidance on Visual Disabilities under the ADA

The Equal Employment Opportunity Commission has issued new guidance for employers to provide reasonable accommodations for visually impaired workers who request it.

About 18.4% of all American adults have at least some difficulty with their vision, even when wearing corrective lenses, according to the U.S. Centers for Disease Control and Prevention.

The new guidance addresses what employers who have a vision-impaired job applicant or worker can and can’t do under the Americans with Disabilities Act and what to do if they request, or if you want to offer them, specific accommodations to help them perform their jobs better and more safely (or help them complete the application process).

Under the ADA, if a worker with a disability asks for accommodation so they can better perform their job, their employer must enter into an interactive process with them to discuss ways that accommodation would be possible. You do not have to provide accommodation if doing so would be an “undue hardship.”

Here are the main points of the EEOC guidance:

Reasonable accommodation

The guidance lays out a number of accommodations that employers can provide for workers or job applicants with visual impairments, including:

Guide dogs,
Assistive technology, including:
- Screen readers (or text-to-speech software). These are software applications that can convert written text on a computer screen into spoken words or a Braille display. These tools can allow individuals to quickly review written text.
- Optical character-recognition technology that can create documents in screen-readable electronic form from printed ones, including an optical scanner (desktop, handheld or wearable).
- Systems with audible, tactile or vibrating feedback, such as proximity detectors, which can alert individuals if they are too close to an object or another person.
- Website modifications for accessibility. This entails taking steps to ensure that job applicants and employees can access and timely complete job applications, online tests or other screening tools.
Documents in Braille or large print.
Ambient adjustments (such as brighter office lights); and sighted assistance or services (such as a qualified reader).

Asking about vision impairment

According to the new guidance, applicants are not required to disclose they have any type of vision impairment or disability unless they are seeking a reasonable accommodation to assist with some aspect of the application process, such as a larger font or Braille on the written application.

Employers cannot generally ask questions about obvious vision impairment. However, if you “reasonably believe” the applicant will need an accommodation to perform the job, you may ask if one is needed, and if so, what type.

For example, if a job applicant uses a white cane when entering the room for a job interview, you can ask if they would need a reasonable accommodation in the workplace.

Once someone is hired or after they’ve received an offer, you may ask certain questions such as:

How long the applicant has had the vision impairment.
What, if any, vision the applicant has.
The applicant’s specific visual limitations and what reasonable accommodations may be needed to perform the job.

The takeaway

The EEOC guidance is expansive, and this article focuses on the main parts of it. Among the other areas it covers are:

How an employer should handle safety concerns about applicants and employees with visual disabilities.
How an employer can ensure that no employee is harassed because of a visual disability.
The importance of keeping medical records of workers with a vision disability confidential.
How to avoid discriminating against individuals who are vision-impaired.

Finally, considering that nearly one in five U.S. adults has some form of visual impairment, this guidance aims to help employers find a solution for reasonable accommodation. Many accommodations can be implemented with little cost to a business.

If you have questions about the new guidance, please call us.

Group Health Plan Affordability Level Cut Significantly for 2024

The IRS has significantly reduced the group plan affordability threshold — which is used to determine if an employer’s lowest-premium health plan meets the Affordable Care Act rules — for 2024.

The threshold for next year has been set at 8.39% of an employee’s household income, down significantly from 9.12% this year. The lower threshold will likely require employers to reduce their employees’ premium cost-sharing level for their lowest-cost plans in 2024, to avoid running afoul of the ACA.

This is happening just as group health plan premiums are expected to climb at a much faster clip in 2024 than the last three years.

Under the ACA, “applicable large employers” — that is, those with 50 or more full-time or full-time equivalent employees (FTEs)— are required to offer at least one health plan to their workers that is considered “affordable” based on a percentage of the lowest-paid employee’s household income.

The lowest level yet

The new level is the lowest affordability threshold since the ACA took effect, and almost one-and-half percentage points lower than the 9.89% threshold in 2021. The new threshold will apply to all health plans when they incept in 2024. For plans that incept after Jan. 1, the 2023 threshold will apply and change to the new rate when they renew later in the year.

Employers can rely on one or more safe harbors when determining if coverage is affordable:

The employee’s W-2 wages, as reported in Box 1 (at the start of 2022).
The employee’s rate of pay, which is the hourly wage rate multiplied by 130 hours per month (at the start of 2022).
The federal poverty level.

Example: The lowest-paid worker at Company A earns $25,987 per year. To meet the 2024 affordability requirement, they would have to pay no more than $2,180 a year in premium (or $181 a month).

Employers with a large low-wage workforce might decide to utilize the federal poverty level ($14,580 for 2024) affordability safe harbor to automatically meet the ACA affordability standard, which requires offering a medical plan option in 2024 that costs FTEs no more than $101.94 per month.

If an employee’s coverage is not affordable under at least one of the safe harbors and at least one FTE receives a premium tax credit for coverage they purchase on an ACA exchange, the employer may have to pay a penalty, known as the “employer shared responsibility payment.”

The shared responsibility payment for 2024 will be $4,460 per employee that receives a premium subsidy on an exchange, up from $4,320 this year.

The takeaway

As 2024 nears, you should review your health plan costs and premium-sharing to ensure that your lowest-cost plan complies with the affordability requirement.

We can help you assess affordability to ensure you don’t run afoul of the law. It will be particularly crucial in 2024, considering the significant drop in the threshold.

Report: Group Health Plan Cost Inflation to Pick Up Steam

A new report by Aon warns employers to expect average group health insurance costs to increase 8.5% in 2024, as inflation starts hitting the cost of delivering care as well as pharmaceuticals.

The report predicts that employers will pay an average of $15,088 in 2024, compared to the average this year of $13,906. The cost hike is almost double the 4.5% increases employers saw in 2022 and 2023.

Despite the large expected premium increases, employers still seem to be reluctant to pass on more of the premium cost to their covered workers. For example, for this year, employees saw their premium payments increase an average of just 1.7%.

The challenge will be for employers to properly budget for these cost increases, while not pushing too much of the hike onto their employees, particularly in this highly competitive job market.

The cost drivers

There are a few reasons rates are climbing:

Health care inflation — This is the main culprit behind the expected rate hikes. While health care providers have been contending with inflation since 2021, they’ve been unable to pass them on to health insurers because they usually enter into three-year contracts with locked-in rate hikes.

As these contracts are renewed, health care providers are demanding higher fees for services due to their own costs increasing, particularly for staff wages, equipment and supplies. For example, the cost of emergency services supplies, including ventilators, respirators and other critical equipment, increased by almost 33% between 2019 and 2022.

New technologies — New technologies that hospitals use are also increasing in cost, as is the cost of servicing and installing the equipment.

Catastrophic claims — Every catastrophic claim requires varying levels of intervention and care. Many will require specialized medical care, extensive rehabilitation, advanced medical equipment and potential vehicle and home modifications. Catastrophic claims costs are increasing due to:

Hospital staffing shortages
More high-cost injectable drugs
Increasing cancer rates
Longer hospital stays resulting from multiple conditions, complications and complex procedures
Higher medical equipment costs
Skyrocketing costs of home modifications.

Pharmaceutical costs — There are two significant drug cost drivers:

Specialty drugs: These are significantly more expensive than their traditional drug counterparts, often costing more than $2,000 per month per patient. However, some pharmaceuticals cost much more. The drug Tretinoin, which can help manage complications of leukemia, costs $6,800 a month. Others cost upwards of $100,000 per year. The cost and utilization of these drugs is growing, according to Aon.
New weight-loss drugs: The newest pharmaceutical cost driver is the proliferation of trendy new weight-loss drugs like Wegovy, Saxenda and Ozempic, which cost more than $1,000 a month. These have proven to be highly effective in helping people lose weight and are in high demand. Insurers typically won’t cover these medications if someone simply wants to lose weight, though.

Cost-shifting hesitation

The report predicts that employers will be hesitant to make significant changes to how much their employees contribute to their health plan premiums.

Aon estimates that the average employee premium contribution in 2023 is $2,682, while they pay out another $1,993 in deductibles, copays and coinsurance.

“We see employers continuing to absorb most of the health care cost increases,” Farheen Dam, North American Health Solutions leader at Aon, said. “In a tight labor market, plan sponsors are hesitant to shift significant cost to plan participants and make benefits less affordable.”

Talk to us about your options as 2024 approaches. We can help you with different plan designs and cost-sharing arrangements that may reduce your firm’s premium outlays.

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