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Aaron Zwaska[/caption]
The rising cost of health care coverage is nothing new for employers.
In 2023, health benefit plan premiums grew at an overall rate of 7.1%, according to an annual health care trend report published by Madison-based insurance brokerage M3 Insurance. That’s compared to a historical growth rate of 6.6%.
“This trend appears to be the result of multiple factors, notably inflationary factors on medical costs and the effects of deferred medical care during the pandemic,” according to the report.
Aaron Zwaska, senior vice president at insurance brokerage Brown & Brown in Milwaukee, also cited inflation as a major external factor impacting health insurance premiums, particularly the rising costs health care systems must pay to attract and retain health care practitioners. Since health care systems need to pay higher wages to attract talent, those costs are being passed along to customers purchasing health insurance.
Recent investments in modern health care innovations, like gene therapies, are also a contributing factor.
“With the invention of new therapies is the introduction of significantly higher cost opportunities,” said Zwaska. “You’re seeing some very impressive treatments that could potentially cure significant conditions, but that comes along with significant costs. High-cost claims continue to get higher as new innovations are introduced.”
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David Lancaster[/caption]
The increasing amount of money being spent on specialty prescription drugs is an area of particular concern for David Lancaster, executive vice president of employee benefits at Waukesha-based R&R Insurance Services. What used to be between 10% to 15% of a customer’s total spend has grown to between 20% to 30%.
“We are now seeing situations where we have seven-figure and million-dollar prescription drugs, which are a wonderful thing, but they create significant cost stress to the system,” said Lancaster.
To lighten the financial burden of health care coverage, employers and their health insurance brokers are seeking unique solutions to offer benefits that employees will value.
Moving from a fully insured health insurance plan to a self-insured plan allows for more flexibility in handling prescription drug costs. Another method for cost savings is using a pharmacy benefit manager. PBMs are third-party companies that administer prescription drug benefits on behalf of health insurers, large employers and other customers. PBMs help organizations manage the amount of money being spent on drugs.
For example, by looking at treatment patterns, a PBM would be able to help identify an employee that regularly travels to a clinic for a costly injection and provide an alternative, lower-cost solution, such as having a family member trained to administer the injection at home. PBMs can also find cheaper drug options by searching internationally.
“Plan design changes can no longer be the sole remedy to control cost,” said Lancaster. “We’re going to win the war by attacking on multiple fronts.”
Other health care trends
Brown & Brown is seeing increased interest from business owners in making access to primary care providers easier for employees. During the COVID-19 pandemic, it was more difficult for people to visit their physicians, which led to undiagnosed or unmanaged health conditions.
“You saw a little bit of disengagement with primary care and routine visits, which is dangerous,” said Zwaska.
Some organizations have introduced on-site or near-site clinics to make it easier for employees to receive health care. Constant employee education on the importance of doctor visits is key to encouraging healthy habits.
Easier access to behavioral health care is another benefit that’s become increasingly popular with employees and their families.
Offering multiple health care plans that are attractive to different demographic groups is also appealing, according to Lancaster. For younger generations, like Gen Z, health care is not usually a top priority, so a lower-cost plan with a higher deductible could be the perfect solution. They’ll still have insurance in case of an emergency but will have less money coming out of each paycheck.
At M3 Insurance, the percentage of clients opting to offer high-deductible plans has risen from 69% to 72%.
“This overall trend appears to be driven by an uptick of adoption of consumer-driven plans, medical inflation and employers offering high deductible options to ensure compliance with Affordable Care Act affordability requirements,” according to the report.
Being self-funded is becoming more common because it gives employers more access to data and greater flexibility in customizing their health care benefits plan.
“Employers that have more data are much more successful in negotiating quicker and more effectively because they have a better sense of what’s going on,” said Zwaska.
Managing a health care benefits plan is a year-long process that organizations should plan for strategically, including looking at data from the previous year to see if the budget is above or below average.
Smaller employers may struggle more than larger employers in handling rising health care costs due to their lack of data. Larger employers have more access to data that allows them to manage risk more appropriately, according to Zwaska.
“You also maybe want to do some survey work with your membership to gauge what’s important to them,” he said. “From there, you need to think about what’s next, what’s new and innovative in the marketplace.”
When considering a new benefit offering or plan design, it’s important to take time to research and make sure an innovation isn’t just a trend. You should also give yourself plenty of time to communicate any potential changes to employees.
In handling rising health care costs, Lancaster said it’s less about shifting rising costs onto employees and more about changing the way benefits have historically been offered. Programs that remove employee cost sharing but incentivize healthier behaviors are becoming more common.
“If you have better data, you can make more informed decisions about where you may have specific risk in your membership and where you should invest,” said Zwaska.
