This is especially true in today’s climate of transparency (thanks to the Internet), and is applicable to many aspects of business administration – including employee benefits. It’s easy for employees and applicants to go online and compare several employers’ benefit packages side by side. When an organization compares poorly next to its competitors, turnover can increase and prospective talent may choose to look elsewhere. Employers need to take a hard look at their benefit offerings and ask some key questions, such as:
- How do our benefits measure up in the market?
- Are our premiums fair?
- Is it time to restructure our medical plan?
- Are our current deductibles and copays reasonable?
These questions (and many others) leave a lot of blanks for employers to fill in. Luckily, benefit benchmarking data is available to help employers find answers and ultimately identify their strengths and weaknesses. This information can empower organizations to either keep pace or work a little harder.
We are excited to provide the 2017 update to SilverStone Group’s Healthcare Benefits Benchmark Report. This marks our ninth year of tracking data, and we have incorporated a number of updates to our traditional benchmarking standards to meet changing data trends.
The report serves as a reliable comparison tool, containing aggregated data from SilverStone Group’s clients with 100 or more employees, which includes 132 employer groups and more than 75,000 employee lives. This article will provide a snapshot of key areas for benefit benchmarks.
SilverStone Group tracks plan design features separately for traditional plans and consumer driven health plans (CDHPs). Traditional plans include Preferred Provider Organizations (PPOs), Health Maintenance Organizations (HMOs) and Point-of-Service Plans (POSs), all of which have traditional deductibles and copay structures. CDHPs include high deductible health plans combined with Health Savings Accounts (HSAs) or Health Reimbursement Arrangements (HRAs). The following paragraphs will compare the key differences and trends based on plan design.
Deductibles – Deductibles have changed dramatically over the past nine years. Traditional plan deductibles have increased by more than 75% since 2009, while CDHP deductibles have increased by approximately 35%. The charts below illustrate the significant growth in the average family deductible for both traditional plans and CDHPs.
Out-of-Pocket – Since 2009, out-of-pocket maximums for traditional plans have steadily increased by nearly 45% for individual coverage and 35% for family coverage. CDHPs, however, have experienced a more complex climb. With more employers adopting these types of plans, lower out-of-pocket maximums were initially seen in years one and two, but a slow increase began in year three and beyond. Because our data tracks clients who have had CDHPs in place for multiple years, as well as those who have just recently implemented them, more ups and downs have been recorded in the tracking.
Prescription Drugs – Prescription drug copay structures have also experienced continued change. Employers are shifting from three-tier copay structures (down 25% since 2009) to four-tier structures (up 330% during the same time period), with almost 25% having this type of structure in 2017.
The use of generic medications continues to climb as the number of available generics increases. SilverStone Group’s block averages 84% generic utilization. However, costs associated with specialty medications also continue to climb and have become a key trigger in rising healthcare costs. Employers are looking for ways to combat these increased costs while balancing employee needs for such important medications.
Preventive / Routine Care – As the number of non-grandfathered plans under the Affordable Care Act (ACA) continues to grow, discussions about preventive care maximums have all but concluded. In 2017, 99% of clients with traditional plans and 100% of clients with CDHPs have unlimited maximums for preventive / routine care.
Premiums / Cost-Sharing
SilverStone Group approaches premium increases on a “gross” and “net” basis. This demonstrates how plan design changes (which often result in more out-of-pocket costs for members) can skew results. On average, employers shift 2% to 4% of costs back to employees by increasing deductibles, out-of-pocket maximums, copays and other benefits each year. Since 2009, total premiums have increased by more than 40% for traditional plans and nearly 45% for CDHPs.
Employer premium contributions currently range between 75% and 85%. In an effort to encourage dual-income families to analyze the cost-saving benefits offered under a spouse’s coverage, employers are contributing more toward premiums for individual coverage than for family coverage. Furthermore, a small percentage of employers (7% of SilverStone Group’s clients) are beginning to implement a surcharge or incentive program to encourage spouses to enroll in their own employers’ benefit plans, if available. This number is likely to grow as more employers consider this option. Employers are also encouraging the use of CDHPs by contributing 3% to 5% more toward premiums than they do for traditional plans, and more than 90% of these employers are making an additional contribution to an HRA or HSA on behalf of the employee.
General Plan Information / Plan Funding
Over the past nine years, SilverStone Group’s client base has experienced a claim increase of 38%, forcing employers to shift costs back to employees via premiums and plan design. To lessen the burden of these changes, many companies have found that offering employees a choice in benefits has helped create a happier workforce. Currently, 68% of employers offer dual- or triple-choice options to employees (compared to just 51% in 2009). Additionally, CDHPs continue to grow in popularity, with 52% of firms offering this type of plan (compared to just 24% in 2009).
Companies are beginning to offer more care alternatives, such as telemedicine (which has increased by nearly five times in the past three years). Telemedicine gives employees and their family members the ability to speak with a certified physician via teleconference for things such as ear infections, sore throat, sinus infections and more. It can be a convenient way to receive healthcare and save between 30% and 50% versus going to a primary care physician.
Wellness programs continue to help employers build happier, healthier organizations. In addition to curbing medical costs, they have become a valued perk for employees. Formal wellness programs are offered by 42% of firms and typically include a biometric screen, a health risk assessment and ongoing activities throughout the year. More than half (60%) of the firms offering a formal wellness program outsource to a vendor to help administer the data and incentive plans, and 87% offer incentives to their employees for participation (including premium reductions and HSA contributions). Voluntary benefit programs (critical illness, accident and hospital policies) to supplement both traditional plans and CDHPs are also growing in popularity, with 55% of SilverStone Group’s clients offering these types of programs.
Currently, 70% of SilverStone Group’s clients offer self-funded plans. This plan design is a popular alternative due to the savings on premium taxes and the potential to cut costs when claims are running well. Self-funded plans also offer flexibility in plan design. The chart below outlines SilverStone Group’s self-funded clients by size.
Keeping Pace with the Competition
Potential changes to the ACA and continuing increases in the cost of healthcare and prescription drugs can have a significant impact on employer-sponsored benefit programs. Employers need to review their current programs and make any necessary changes to achieve and maintain a competitive benefits package. SilverStone Group’s benchmarking data can provide an in-depth look at current benefit trends and strategies to help employers make plan decisions that aim to attract and retain key employees. For more detailed information and to get a full benchmark report, please contact the Group Benefits Team at SilverStone Group.
This article originally appeared in the 2017 | ISSUE TWO of the SilverLink magazine, under the title “Are Your Benefits Leading the Pack? | Benchmarking 2017.” To receive a complimentary subscription to the SilverLink magazine, sign up here.