What to Expect in Next Year’s Health Benefits Offerings

 

By Walencia Konrad

June 11, 2010

 

RIGHT about now, as you’re dusting off your beach gear, may seem the wrong time to talk about next fall’s open enrollment for health insurance.

But now is when big employers are busy assembling their benefits packages for 2011. And this year, they are having to factor in the new health law’s requirements, said Pearce R. Weaver Jr., a senior vice president at Fidelity Consulting Services.

 

Not to rain on your beach parade, but come fall you’ll probably be asked to absorb even bigger cost increases than in the last few years.

Although most of the new law’s big changes do not take effect until 2014, there are some provisions employers must comply with by next year. That includes extending health insurance coverage to uninsured dependents up to age 26, eliminating any lifetime or annual caps on coverage and paying 100 percent of some preventive care.

 

As in years past, employers are also grappling with how to offset rising health care costs. Recent years have brought an average cost increase of about 9 percent, said Tracy Watts, a partner at Mercer Health and Benefits. In most cases, companies have been able to absorb about 6 percentage points of those cost increases a year, passing the rest onto employees.

 

This year Ms. Watts estimates that changes made in response to the health law will add an extra 2 to 3 percent in cost increases, pressuring employers to engage in even more cost-sharing with employees — whether through higher premiums, co-payments or other out-of-pocket costs.

 

Mr. Weaver also reports increased interest by employers in high-deductible insurance plans. “They’ve been effective in managing costs,” he said. Such plans set a high annual deductible — starting this year at $1,200 for single employees and $2,400 for families — in exchange for lower monthly premiums.

 

They are usually offered in tandem with a tax-advantaged health savings account. Mr. Weaver and other consultants predict more employers than ever will be offering a high-deductible choice in 2011.

 

Here is a sneak preview of other significant changes you are likely to see, once this fall’s open enrollment scramble begins. Consider it part of your beach reading.

 

PREVENTIVE CARE

The health law requires that all new insurance plans pay 100 percent of preventive care like physicals, cancer screenings and immunizations. But you may not see this change immediately. Under the new law, existing health plans are grandfathered and do not have to offer such coverage in 2011. The question is, what constitutes an

existing plan?

 

Employers have been waiting weeks for guidance from the federal Department of Health and Human Services to find out what types of changes they can make to their health benefits this year — increased co-pays and deductibles, for example, or limits on some types of coverage — without losing grandfathered status.

 

Depending on what that guidance says, you may find that your employer keeps the health benefits package pretty much the same as last year to avoid offering the new coverage. But if your company does start paying for preventive care, be sure to take advantage. Simply catching up with your family’s physicals could save you hundreds of dollars. Ms. Watts said it was striking how many employees did not take advantage of that benefit even when their companies offered it.

 

PAYING MORE FOR DEPENDENTS

You may already know that one of the biggest changes under the health law this year is for employers to extend coverage of uninsured dependents to age

26.

It is becoming apparent that this will be one of the costlier changes employees will face this year, Ms. Watts said. As a result, she expects some employers will increase the amount workers must pay for dependent coverage. Among large employers (those with 500 employees or more), workers now pay an average of $342 a month for family coverage, or 32 percent of the total premium cost. Ms. Watt expects that number to creep closer to 35 percent of premium costs in 2011.

 

In addition, as my colleague Lesley Alderman wrote last week, more companies are auditing employees to make sure that dependents enrolled in the plan are entitled to such coverage.

 

NO LIMITS

There is another 2011 bonus from the new health law: employers must eliminate any cap on lifetime or annual coverage, whether in either existing plans or new ones. That is good news for severely ill employees or dependents who may be edging toward limits of their health care coverage and were worried they would have to start paying their own medical bills.

 

NETWORK DOCTORS

Now is the time that big insurance networks and health care providers conduct their annual negotiations over fee and rate increases. Edward Kaplan, senior vice

president at the Segal Company, says these negotiations have become more intense this year. Lower-paying Medicare and Medicaid patients are expected to make up a larger proportion of many health care providers’ clientele these days, Mr. Kaplan explained. To make up for the shortfall, doctors, hospitals and other care providers are pressuring private insurers to increase reimbursements. That turmoil could lead to turnover within the various networks, Mr. Kaplan said, as insurers drop some providers, or as hospitals or doctors decide to withdraw on their own. When open enrollment season arrives next fall, be sure to check your insurer’s network directory to make sure your doctors, hospital and other health care providers are still members.

 

EARLY RETIREES

The government has put aside $5 billion in subsidies for employers that continue to offer early retiree health care benefits for workers ages 55 to 64. Eligible employers will receive 80 percent of claims above $15,000.

 

Employers that offer early retiree benefits are still sorting through eligibility requirements and the application process. But Mr. Weaver predicts that the subsidy could go a long way toward encouraging employers to keep their early retirement health benefits in place. If you’re one of the lucky people whose company offers early retiree medical benefits, you’ll probably see that plan stay in place in 2011.

 

INNOVATIVE PROGRAMS

A few employers will continue to conduct programs aimed at helping workers manage chronic illnesses like asthma, diabetes and heart disease. Boeing, for example, recently started a program under which primary care providers regularly monitor chronically ill patients to make sure they are taking their medicines and help them make the lifestyle adjustments necessary to stay healthy. Those providers also coordinate care with specialists and are accessible to the patient around the clock.

 

As a result, Boeing found a 20 percent reduction in health care costs per member enrolled in the program. Patients fared better and avoided costly emergency room visits, hospitalizations and other major medical episodes. If you have a chronic illness or health condition, look for such pilot programs in your open enrollment materials.