Every year the Kaiser Family Foundation puts together a massive and impressive report related to employer-sponsored healthcare, with over 2,000 firms filling out the survey. The notes and takeaways from the 2017 survey are below:
Trend: spend is up 4%, a slowdown from previous years but continues to outpace wage growth. The average PPO plan costs ~$7,000 for single coverage, HDHPs ~$6,000.
Plans and Contributions: average employee contributions for single/family coverage are 18% and 28% of premiums and stable vs. 2016; OOP max averages $3,600 for large firms and deductibles average $1,276, up 3% yoy; if you net HSA/HRA employer contributions, 40% of employees have a single deductible of $1,000+; 69% of jumbo groups (5,000+ lives) offer HDHPs (flat yoy); average HSA employer contributions are now $608, down 11% from 2016.
Wellness: new to 2017 survey is how wellness programs are evaluated by employers. 89% look at participation, 59% employee satisfaction, 42% outcomes, 32% retention, and only 32% ROI.
Some form of wellness is offered by 85% of large firms, flat yoy. Close to half of jumbo employers offer an incentive, flat yoy. Employers were asked about the perceived effectiveness of wellness plans: ~35% said they were very effective in 2016 while 30% in 2017 indicated they were very effective. So the value, or what you get compared to what you pay, is either not apparent or doesn’t bring fruit.
Health Risk Assessments are stable yoy at 62% of large employers offering them but results and effectiveness vary wildly with close to half showing 25% or fewer completing them while 19% have 75%+ complete them.
Biometrics: median incentive when offered is $400-500. Only 4% of employees have outcomes based incentives (52% of employers*53% offering an incentive*14% offering an outcome-based reward or penalty).
Wearables: 14% of large firms collect data from them, down from 16% in 2016.
Disease management incentives are offered by 26% of large employers (68% of employees participate).
Prescription Drugs: copays and tiers relatively stable yoy; changes focus on specialty Rx due to cost growth: avg copay for specialty up $11 but coinsurance rate stable over time. Tiers 2-4 have actually moved more to a copayment model (vs. coins) with the largest change tier 4, now at 48% offering a copay vs. 27% in 2016.
Care access: telemedicine’s growth accelerates as 63% of employers offer it in 2017 compared to 39% in 2016. Telemedicine’s value is most obvious for both rural areas and the 90% of users that are non-ER in nature and the direction to a lower cost path of care. Challenge is low utilization, which averages under 5%.
Voluntary benefits: for large firms, the percentage that offer benefits and the % that offer a contribution towards coverage: dental (97%/67%) vision (82%/54%), critical illness insurance (46%/3%), hospital indemnity (28%/5%), long-term care (25%/47%). Lower company subsidies equates to lower actual value to employee (more gimmicky).
Private exchanges: 4% of active employees are enrolled in one. Despite interest in past surveys, adoption is flat. I asked the head of Willis Towers Watson’s investor relations a follow-up question on trend (they had reported 1.8% BoB medical trend 2 years ago for exchange clients). Her answer was that they weren’t breaking that out and instead were focused on implementation. The trend value prop, in aggregate, hasn’t played out. 10% of large employers are considering private exchanges for active employees, down from 18% in 2016. This is due to wait and see, lack of urgency, legislative changes, ability to manage plan values with a single carrier (simplicity); lack of value/results – initially touted as a way to manage trend.
Networks and Carriers: tiered and narrow network changes are flat yoy with 15% and 9% of employers offering a plan with those. 3% of employers eliminated a hospital system or health system, similar to 2016. <10% switch carriers in a given year. 88% of large employers use a broker or consultant to assist in choosing a health plan.
Legislative changes are unknowable but no big changes are expected in the employer-sponsored market—next year’s benefit level is likely to be +/- 3 to 5% of what we see now. The barriers to a healthcare spend slowdown continue to be: 1) demographics: chronic conditions, correlation of healthcare and age; 2) general inflation: around 2%; 3) regulation: rules on what must be covered, reimbursement, pre-existing conditions; 4) technology: may make some types of care more expensive, 5) wealth: the more wealth we have, the more we’re willing to spend on our health.
Opportunities to add limited value stem from plan designs, contribution levels, HSA enrollment and investing, incentives, navigation, education, communication, benchmarking of benefits for employers and employees, data analytics, technology, telemedicine, and narrow networks.
Olavi Group, LLC