Small Businesses No Longer Going for the Gold in Medical Insurance
By Carol Taylor
Benefits Advisor at D&S Agency
A UBA Partner Firm
Small employers are feeling the squeeze from increasing costs of medical care and increasing premiums for the medical insurance they offer their employees. Recently released findings from the 2015 UBA Health Plan Survey show that 54 percent of small employers are currently offering gold or platinum plans to their employees. However, with the pressure from rising medical care costs, the introduction of community rating in setting insurance rates, and the end of grandmothering, it is highly unlikely that this trend will continue.
The community rating model that was launched with the Patient Protection and Affordable Care Act (ACA) allows insurers to set premiums based only on age, geographic area, tobacco use, and individual vs. family enrollment, spreading the risk more evenly. However, that also means that employers whose employees have lower risk factors will no longer be able to take advantage of lower insurance rates. As grandmothering of plans comes to an end in 2016, small employers can no longer delay the effects of community rating and will have no choice but to reduce benefit levels to maintain coverage.
While the majority of small employers are offering higher level benefits, the survey also shows that employers continue to shift a greater share of expenses to employees through out-of-pocket cost increases. Over a five-year period, median in-network single deductibles have doubled, going from $1,000 in 2010, to $1,500 in 2014, to $2,000 in 2015.
Taking a look at small employer benefit options in Virginia, one of a handful of states that did not allow grandmothered plans, platinum level plans currently have no deductible, but the in-network out-of-pocket maximums range from $1,600 to $6,000, depending upon the insurance carrier. The plans are mainly driven by copays assessed at the place where care is received, versus a coinsurance percentage. Given that in-network deductibles, copays and coinsurance amounts all roll up into the out-of-pocket maximum, as consumers become more savvy they will look for ways to save on insurance premiums. This will also prompt employers to reduce metal levels.
Another major factor in determining medical insurance premiums is the cost of medical care. With many prescription drug prices skyrocketing, this will drive premiums ever higher. As hospitals, particularly those in areas with large uninsured populations as well as large populations on Medicare and Medicaid, increase reimbursement rates to private insurance carriers to offset the losses they incur with government-set payment levels, premiums will increase. Until pricing transparency for medical procedures and prescriptions becomes reality, we will continue to see deductibles, coinsurance and copays rise, along with out of pocket maximums and premium amounts.
Very few platinum level plans are offered and, they will continue to decline in number as employers can no longer afford them. Gold level plans have also decreased in number, so employers have fewer options. As employers shift to silver and bronze plans to reduce costs, insurance carriers will offer even fewer gold and platinum plans.
While employers are faced with a paradox of offering benefits to attract and retain talented employees, the cost at some point will be too much to bear and many will be forced to reduce the metal level in the future.
Even the lowest quality “bronze-level” health insurance plans on the ACA exchanges are at risk of triggering the Cadillac tax. Read our latest press release, which details the findings, potentially affecting 74 percent of employers by 2022.
Download the free 2015 Health Plan Survey Executive Summary for additional information on health plan cost trends across the U.S., including employer contributions and costs for employees.
To benchmark your plan against others in your region, industry or size bracket, contact a UBA Partner near you to run a custom benchmarking report.