Newer-style health insurance plans, with lower premiums but high deductibles, are forcing more Kansas City area employees to think twice about the health care dollars they spend.
A survey released Wednesday showed that a lot more area employers are offering the new plans as the latest hope to control health care benefit costs. The annual National Survey of Employer-Sponsored Health Plans, by the Mercer professional services company, also found that those costs rose 5.4 percent this year.
The newer health insurance options are called “consumer-directed health plans,” or CDHPs. Employers are nudging employees toward such plans instead of the more familiar preferred provider organizations, or PPOs.
In that respect, “everything’s up to date in Kansas City,” said Mark Whiting, principal in Mercer’s Kansas City office. “The area’s employers are offering high-deductible consumer-directed health plans, the wave of the future, at far higher rates than nationally.”
According to the Mercer analysis, 71 percent of the Kansas City area employers who provide employer-sponsored health insurance offered the high-deductible plans. That’s up from 50 percent a year ago.
Area companies are also outpacing the national percentage of employers offering such plans. Nationally, 48 percent of employers offered them, up from 39 percent last year.
Employers hope the plans will reduce their health benefits costs, give a price break to their employees who enroll in them and, possibly, reduce their exposure to the “Cadillac” excise tax that the Affordable Care Act will assess in 2018 on expensive coverage plans.
So far, though, Kansas City employees, like a majority nationally, haven’t flocked to the plans, possibly because they generally come with high deductibles. The plans are less familiar than their former PPOs and there isn’t much of a record yet to convince employees they’d be getting a better deal.
Only a third of Kansas City area employees who were offered health insurance plans enrolled this year in the high-deductible plans, Mercer’s local figures show.
Still, that’s higher than the 23 percent national adoption rate. And it’s a big jump from last year’s 20 percent enrollment rate locally.
Whiting said data indicate that employees benefit financially by choosing the plans. Employees this year are paying an average of 19 percent of total high-deductible-plan costs compared with 25 percent of the cost of preferred provider plans.
“The cost of CDHPs is notably lower than PPOs, so employees are paying both a lower percentage and a lower dollar amount — a double win for them if they enroll in CDHPs,” Whiting said.
This year, the average Kansas City employee contribution amount for employee-only coverage is $118 a month for PPOs, compared with $94 a month for employee-only high-deductible coverage.
The local breakout by Mercer didn’t include the costs of family coverage.
It’s hard to tell, though, whether adoption of the newer plans is taming overall health insurance cost growth.
In the Kansas City area, the 5.4 percent rise in total health benefit costs for active employees amounted to an average total cost of $11,229 per employee, according to the Mercer analysis. That’s higher than the national average of 3.9 percent cost growth this year to a total per-employee cost of $11,024.
This year’s cost increase in Kansas City also was slightly higher than the 5.2 percent recorded in 2013, but Whiting cautioned that the Mercer survey reaches different employers each year, so exact comparisons aren’t possible.
The percentage per-employee cost increases, locally and nationally, did show that the inflation rate for this kind of health insurance still is about twice as high as the annual inflation rate for all goods and services.
On the plus side, the health insurance cost spiral has been lowered from its national 7 percent average growth rate over the last 15 years.
The high-deductible plans often come with incentives that lower monthly premiums further for workers who participate in wellness activities, such as health screenings, exercise or diet programs, or meet healthy goals, such as quitting smoking.
Also, employers offering the plans generally provide set dollar amounts to employees to put into Health Savings Accounts or Health Reimbursement Accounts. That helps ease the employees’ out of pocket costs, with the expectation employees will spend that money carefully and, perhaps, build health savings from year to year.
But the catch that so far causes employees to shy away from choosing the plans is their high deductibles. While monthly premium costs are higher in PPOs, the out-of-pocket deductible limit for employees is generally far lower. Until employees have more year-over-year comparison, many workers still wonder which option makes better sense for them.
The Mercer report dovetailed with a separate survey, also released Wednesday, by the Society for Human Resource Management and the Employee Benefit Research Institute. That survey found that the addition of fitness rewards or incentives for employees is the most common change planned by employers. About one-fourth of employers are making that change.
Mercer and the human resource group both found that employers are not abandoning their health insurance plans, despite some fears that the Affordable Care Act would encourage employers to do that.
“Health care benefits are a valuable employee recruiting tool,” said Andrew Mariotti, senior reseacher at the human resource association.
Only 1 percent of employers nationally plan to eliminate employee health coverage next year, according to the human resource survey.
Instead, 7.9 percent of employers will continue to try to pare costs by requiring employee spouses to get coverage through their own employers, if available, and 6.7 percent will implement spouse surcharges.
The Mercer analysis found more companies considering abandoning their plans. Three percent of Kansas City area employers in the Mercer survey said they were likely to terminate their employee health plans within the next five years and send employees to the “Obamacare” public exchanges. That compared with 4 percent of large employers and 15 percent of small employers nationally.
Another notable way employers are paring their health care costs is by hiring more part-timers or limiting normal work hours of employees to less than 30 hours a week, the line over which the Affordable Care act requires employers to offer health care benefits.
About 1 in 10 large employers told Mercer researchers that they had reduced those employees’ hours to less than 30.
The separate human resource group survey found only 1.3 percent of employers who now offer coverage for part-time employees saying they intended to stop that.
John Leifer, a Kansas City health industry watchdog and author of “The Myths of Modern Medicine,” doubts that any employer or insurance product can tame the medical cost spiral.
“Insurance plans, high deductible or not, are really not effective mechanisms for controlling costs,” Leifer said. “Cost control requires far more teeth than insurance providers have. Price controls on the cost of providing medical service is the only way to reduce health care costs.”
The Mercer report indicated that more likely within the next five years is large employers moving into private health insurance exchanges. Twenty-eight percent said they were likely to shift to private exchanges, which are not part of the Affordable Care Act.
Private exchanges are created by insurance companies, brokerages or consulting firms to sell policies to both individuals and employers. Typically, employers who participate in private exchanges give workers a set amount of money to buy coverage on the exchange, choosing among benefits approved by the employer.
The 2,569 employers participating in the Mercer study projected that their per-employee health benefit costs would rise an average of 4.6 percent next year. That projection depends on making continued coverage changes in their current plans; without changes, the expected costs would jump 7.1 percent.
The Kansas City component of the Mercer report reflected answers from 35 area employers, enough to draw some broad statistical conclusions.