Most working adults in the United States have been firsthand witnesses to the dramatic increase in healthcare costs over the last 10 to 20 years. Where most employer-sponsored medical coverage used to have very affordable monthly premiums, and to many, were an afterthought from a budgetary standpoint; employees and individually insured members now find themselves needing to explore creative plan designs to lessen the financial burden of increasing costs nationwide. However, from an employee retention standpoint, it is important to not decrease the level of benefits too much to combat rising costs. However, for many people who were once used to low-deductible health plans at affordable monthly rates, increasing deductibles and out-of-pocket maximums on their coverage reflects poorly on their employer.
A 300-employee nonprofit client of Summit found themselves in the predicament of needing a solution to curtail the rising costs on their low-deductible health plan. With a deductible of $750 for single, in-network coverage, employees were used to a level of coverage that was becoming increasingly unaffordable each year. The group’s most recent renewal had been a 22% rate increase, and it was quickly becoming apparent that the plan was unsustainable.
Where a quick solution to rising costs would have been simply to decrease the level of benefits within the plan, Summit knew that method would not be taken well by some employees. Despite the low deductible, a large percentage of the employees were not even reaching that amount. In this case, the goal was to create a solution that would allow members to keep the same deductible (for those who truly needed it), while also allowing members with good claims experience and low utilization to create savings due to their healthy status.
After analyzing claims data and seeing that a small percentage of employees were meeting their calendar year deductible, Summit recommended that the group transition from a $750 deductible plan to a $1750 deductible HSA plan. They also suggested that the employer fund $1000 of each employee’s HSA to mitigate all exposure from increasing the deductible on the plan. This would allow high utilizers to maintain the low level of out-of-pocket responsibility/exposure on the plan, while allowing low utilizers to accumulate funds in their HSA to be saved for future expenses. Additionally, a prescription benefit was added to the plan through a nonprofit purchasing coalition, which allowed employees to maintain the same discounts that they had been receiving under the old plan.
These plan changes were structured in a way that benefited all employees throughout their diverse demographic base; 70% of their employees were male with an average age of 29, and 30% were female with an average age of 41. Most of these employees were paid on an average base wage scale. The younger male population who did not necessarily need a $750 deductible, now had a vehicle for accumulating year-to-year savings based on low claims, and the older female/male populations had instant funds to spend on out-of-pocket expenses for the year.
Following the implementation of these solutions, the group was able to reduce their monthly premium rather than receive a 22% increase, and employees felt more confident about their ability to create savings due to their healthy status. Additionally, the large employer contribution to each employee’s HSA made it clear to employees that their employer was actively invested in their health and financial well-being and created positive trends in the areas of recruitment and retention. Going forward, Summit will continue to analyze the utilization of the plan and evaluate and consider alternative plan options on a yearly basis, to ensure that this solution continues to work the best.
These results are for illustrative purposes only and should not be deemed a representation of future results. Circumstances, solutions, and/or results are based on specific facts tied to unique client situations. Favorable results cannot be guaranteed even in a similar scenario. Each specific set of circumstances will differ depending on client needs and profile. Actual results may be more or may be less than those shown. Past performance does not guarantee future results. This assessment is that of the writer, and not the recommendations or responsibility of Cetera Advisor Networks LLC or its representatives. The solutions presented in this scenario are being offered through Summit.
Todd Rolland is not affiliated with Cetera Advisor Networks LLC.