Employers Double Down on Employee Benefits

As the job market tightens and competition for workers becomes fiercer, a majority of employers are boosting their employee benefits offerings and are paying less attention to reducing associated costs, according to a new study.

The changes reflect the shifting priorities of the workforce and the newest generation to enter the job market. The challenge for employers is controlling benefit costs, while at the same time being able to attract and retain talent as competition for workers increases.

The “2018 Benefits Strategy & Benchmarking Survey” by Gallagher Benefits found that U.S. employers were most concerned with:

  • Attracting and retaining talent. This was the number one operational priority for 60% of employers.
  • Controlling benefit costs. This was the top priority for another 37%.

The study authors said they are noticing a “clear shift in the market” because employers are having to compete so fiercely for workers and because the workforce comprises five generations, all of which have very different priorities and needs. Besides beefing up their health insurance offerings, they are also boosting other employee benefits.

New strategies

Employers are also adopting new strategies to help their employees get the health care services they need. The survey found that:

  • 45% of employers have increased employee cost-sharing of health care benefits.
  • 55% of employers provide telemedicine services that allow employees to speak remotely with medical professionals.
  • More employers are focused on helping their employees reduce their medical expenses with wellness programs and prevention services. The most popular offerings include:
    • Flu shots
    • Tobacco cessation programs
    • Health risk assessments
    • Biometric screenings
  • Financial wellness programs are gaining popularity, with 62% of employers providing access to financial advisors.
  • 89% of employers offer employees life insurance
  • 70% of employers provide access to employee assistance programs.
  • 47% of employers offer financial-literacy education to help employees better manage their money.
  • 22% of employers offer employees three medical insurance plans to choose from (another 13% offer four or more).
  • 46% of employers offer tuition reimbursement.

Proposed Rules Include New Ways to Satisfy Employer Mandates

The IRS has proposed new regulations that could let employers avoid Affordable Care Act employer mandate-related penalties by allowing them to reimburse employees for insurance they purchase on health insurance exchanges or the open market.

The regulations are not yet finalized, but the IRS has issued a notice explaining how applicable large employers, instead of purchasing health coverage for their workers, would be able to fund health reimbursement accounts (HRAs) to employees who purchase their own plans.

Under current ACA regulations, employers can be penalized up to $36,500 a year per employee for reimbursing employees for health insurance they purchase on their own.

Employer mandate refresher

Applicable large employers (ALEs) – employers with 50 or more full-time employees or full-time equivalents – must offer health coverage to at least 95% of full-time employees that includes:

  • Minimum essential coverage: The plan must cover 10 essential benefits.
  • Minimum value: The plan must pay at least 60% of the costs of benefits.
  • Affordable coverage: A plan is considered affordable if the employee’s required contribution does not exceed 9.56% (this amount is adjusted annually based on the federal poverty line; 9.86% will be the 2019 affordability percentage).

ALEs that fail to offer coverage are subject to paying a fine (called the responsibility payment) to the IRS.

How the new rule would work

The IRS is developing guidance on how HRAs could be used to satisfy the employer mandate.

In its recent notice, the agency addressed how the regulation will play out, as follows:

Requirement that ALEs offer coverage to 95% of their employees, and dependents if they have them – Under the proposed regs and the notice, an employer could satisfy the 95% test by making all of its full-time employees and dependents eligible for the individual coverage HRA plan.

Affordability – The employer would have to contribute an amount into each individual account so that the remaining out-of-pocket premium cost for each employee does not exceed 9.86% (for 2019, as adjusted) of the employee’s household income.
This could be a logistical nightmare for employers, and the IRS noted that employers would be able to use current affordability-test safe harbors already in place in regulations.

Minimum value requirement – The notice explains that an individual coverage HRA that is affordable will be treated as providing minimum value for employer mandate purposes.

What you should do

At this point, employers should not act on these regulations. The IRS is aiming for the regs to take effect on Jan. 1, 2020.

The final regulations have yet to be written, so they could change before they are promulgated. We will keep you informed of developments.

HDHP Enrollees More Likely to Consider Costs and Quality

A new study has found that people enrolled in high-deductible health plans (HDHPs) actually are more likely to consider costs and quality when considering non-emergency care.

The 14th annual “Consumer Engagement in Health Care” study by the Employee Benefits Research Institute and market research firm Greenwald & Associates surveyed 2,100 adults, most of whom receive health coverage via their employers.

The survey found that people enrolled in health plans with a deductible of at least $1,350 for self only, and $2,700 for families, were more likely to take costs into account when making health care decisions.

Evidence of cost-conscious behavior:

  • 55% of HDHP enrollees said they checked whether their health plan would cover their care or medication prior to purchase, compared to 41% in traditional health plans.
  • 41% of HDHP enrollees said they checked the quality rating of a doctor or hospital before receiving care, compared to 33% of those in traditional plans.
  • 41% of HDHP enrollees asked for a generic drug instead of a brand name drug, compared to 32% of traditional plan enrollees.
  • 40% of HDHP enrollees talked to their doctor about prescription options and costs, compared to 29% of traditional plan participants.
  • 25% of HDHP enrollees used online cost-tracking tools provided by their health plans to manage their health expenses, compared to 14% of people in traditional plans.
  • HDHP enrollees also were more likely to take preventive measures to preserve health, including enrolling in wellness programs.

That said, the study did find some negative behavior among HDHP enrollees as well, including that 30% of HDHP enrollees said they had delayed health care in the past year because of costs, compared to 18% of traditional plan participants.

What you can do

In order to help HDHP enrollees get the most out of their plans, it’s recommended that their employers also offer health savings accounts.

This can help them pay for services that are not covered until they meet their deductible. Employers can help by matching (fully or in part) employees’ HSA contributions. This encourages them to participate.

Employers should also push preventative care. The Affordable Care Act requires all plans to cover a set of preventative care services outside of the plan deductible. Unfortunately, many people don’t know that these services must be covered by insurance with no out-of-pocket expenses for the enrollees.

Some employee benefits experts are recommending that employers tie the amount of premiums employees are required to contribute to how well they comply with preventative guidelines.

Non-enrollment in HSAs

These are the reasons employees cite for not enrolling in their company’s HSA:

  • Do not see any advantages: 57%
  • Do not have enough money to contribute to the account: 24%
  • Their employer doesn’t contribute to the account: 10%
  • Did not take the time to enroll: 8%
  • Do not understand what the HSA is for: 6%

The key to getting your staff to take advantage of the tax-savings feature of HSAs is education. You should make sure all of your eligible staff understand how they work.

And if you are not currently contributing some funds to their HSAs, now might be the time to consider doing that.

Even Workers Who Don’t Use Wellness Plans Recommend Their Employers to Others

Even if your employees do not use the wellness plans you offer them, those same plans still help boost employee loyalty, a new study has found.

Chances are that by virtue of your organization offering wellness plans, your employees appreciate it and will be more likely to recommend your business as a good place to work, the study by Optum, a health services company owned by UnitedHealth Group, found.

The findings reflect the advantages of wellness plans in attracting and retaining talent.

The more expansive your offerings, the more loyalty you foster, the study found. For example, it found that at workplaces that offer more than seven health and wellness programs:

  • The employer is almost twice as likely to retain current employees, and
  • Employees are three times as likely to recommend their company as a place to work.

 

One of the striking findings from the survey was that 29% of employees who don’t participate in any of their employer’s wellness programs are still likely to recommend their company as a good place to work. Optum researchers concluded that this was because if the employer offers a wellness program, it makes them feel like the company cares for them as employees.

That said, 48% of workers who frequently participate in health and wellness programs were extremely likely to recommend their employer as a place to work.

And the more wellness offerings an employer has, the more likely their employees are to recommend them as a good place to work:

  • 53% of survey respondents said they’d recommend their company if it provided seven or eight wellness programs.
  • 30% of survey respondents said they’d recommend their company if it provided four to six programs.
  • 24% of survey respondents said they’d recommend their company if it provided one to four programs.
  • 18% of respondents said they would recommend their employer even if it offered no plans.

 

The most popular offerings

A well-rounded benefits package ideally combines great medical coverage with fitness programs, support groups and healthy office conditions.

 

Here are the most sought-after wellness plans that Optum survey participants cited:

  • Biometric screenings and preventative health assessments.
  • Programs to improve health, like wellness coaching, on-site medical clinics.
  • Discounted prescriptions.
  • Having a physical work environment that supports healthy decisions (sit/stand desks, healthy food, on-site fitness centers).
  • Smoking cessation program.
  • Weight loss program.
  • Chronic-condition management program.
  • Employee assistance programs.
  • Programs to help workers stay healthy and prevent illnesses, such as flu shots, gym discounts and fitness challenges.

 

Optum recommends that as an employer, you should:

  • Focus on working with the biggest users of your wellness program to recruit others into the program. “Promoters are your most valuable employees. They’re most likely to participate in your programs and, possibly as a result, they experience less stress and more satisfaction at work,” Optum writes.
  • Focus on trying to win over those who might shun your plans by finding out what their needs are (they may have issues in their life, like financial or relationship problems that your offerings may not address). There may be a low-cost solution to meeting their needs as well.
    You can find out by circulating a survey and finding out where your wellness program may be falling short and asking workers what they’d like to see in a wellness plan. The best option is to have a number of choices, so they can just check boxes.

Despite Ruling That ACA Is Invalid, the Law Stands for Employers

A ruling by a U.S. District Court judge in December 2018 that the Affordable Care Act is unconstitutional is not expected to stand but, if it does, the moves that have been made in the health insurance space to reduce costs, deliver better care outcomes and make the system more efficient would be expected to stay.

For those employers that were offering health coverage to their employees before the ACA and have continued since, the marketplace dynamics would likely not change much if the ruling were not overturned on appeal.

Additionally, since there has been some success in the employer-sponsored health care space in keeping cost inflation relatively tame, there would likely be no incentive for health insurers and providers to abandon those efforts.

The more likely outcome is that a higher court (and eventually likely the U.S. Supreme Court) overturns U.S. District Judge Reed O’Connor’s ruling that because Congress eliminated the individual mandate portion of the ACA, the rest of the law is also invalid and cannot stand. That means all aspects of the law, including health care exchanges, the employer mandate, and the requirement that policies cover 10 essential benefits, and much more. The individual mandate was repealed at the end of 2017.

Several states such as Massachusetts, New York and California have since intervened to defend the law. They argue that, if Congress wanted to repeal it, it would have done so. The Congressional record makes it clear Congress was voting only to eliminate the individual mandate penalty in 2019; it indicates that they did not intend to strike down the entire ACA.

The original lawsuit against the ACA was brought by 20 attorneys general from Republican states, and now 17 attorneys general led by California’s Xavier Becerra have filed a notice of appeal with the 5th U.S. Circuit Court of Appeals in New Orleans.

Interestingly, the Trump administration filed a brief early in 2018 encouraging the court to uphold the ACA but strike down the provisions relating to guaranteed issue and community rating.

There have been more than 70 attempts to invalidate the ACA in courts across the country, and two of those cases made it to the Supreme Court. The last time the ACA was upheld was in 2012 and all five justices who voted at that time to uphold the law are still on the bench today.

Additionally, the ACA is an extremely expansive piece of legislation, which has been on the books since 2010. Legal pundits say it’s unlikely the Supreme Court would want to strike down a law that affects millions of people in the country. In fact, because of this the court may decide not even to take up the case if the 5th Circuit has overturned O’Connor’s ruling.

Employer effects

While this case is under appeal the law will stand, meaning that all parts of it, except the individual mandate, will remain. That means all employers who are considered “applicable large employers” under the ACA, will be required to continue offering health insurance to their workers.

If you are one of them, you need to continue complying with the law of the land as it stands. And remember, while Congress eliminated the penalties associated with not complying with the individual mandate, the penalties for not complying with the employer mandate are still very much in place. Fines can be severe for non-compliance.

This ruling is not expected to affect those penalties, reporting requirements, or any other applicable ACA requirement at this time.

Businesses Boost Employee Benefits, but Workers Yawn

Despite many employers’ best efforts to improve the benefits packages they offer their staff, many employees are not satisfied with their health plans, according to a new survey.

With the job market tightening, many businesses have upped their game in their benefits offerings. While the employers surveyed believed their health benefits packages are getting more competitive, employee satisfaction is not increasing, according to Arthur J. Gallagher’s “2018 Benefits Strategy and Benchmarking” survey.

The number of employers that consider their health benefits more competitive within their industry or region was 74% in 2018, compared to 71% in 2017. However, those same employers reported that employee satisfaction with their offerings remain unchanged.

The report concluded that employees are likely to feel their benefits are stagnant because of the cost of family health coverage as well as the complexity of benefits these days. Overall, there’s a disparity of 28 points between employers that believe this coverage is affordable (53%) and those that have the same take on their individual coverage (81%).

The report also suggests that employers have to get more creative in how they communicate their health benefits to their employees.

While 74% of respondents say managing the cost of health benefits is a top priority, only 44% say they have an effective strategy for doing so.

The top cost management challenges for employers are:

–       The cost of medical services (65%), and

–       Prescription drugs (50%).

Another challenge is the makeup of the workforce. It now consists of five generations, and satisfying the wide-ranging benefit expectations of these diverse employees within an affordable cost structure requires employers to adapt.

 

What you can do

The report recommends increasing benefits choices and flexibility by letting your staff select plans that best fit their needs.

For one, since people are living longer than ever before, they will also be shelling out more in health care expenses over their lifetimes than in the past.

One way employers can cater to their staff is to add voluntary benefits like life insurance and long-term care, among other similar options.

These types of programs can help employees financially weather a serious medical emergency that can cost them dearly if they don’t have proper coverage, including the loss of income if an illness keeps them from working.

By offering them the opportunity to customize their benefits, employers foster greater satisfaction and more productive work-life integration.

The report recommends the following:

·      Offer multiple medical plans, so that your staff can choose one that best fits their budget and health care needs.

·      Offer employer-sponsored dental plans and group life insurance.

·      Make health savings accounts available, so that employees can sock away funds tax-free and build a reserve of funds to pay for health care after they retire.

·      Offer tuition assistance as a voluntary benefit, and adopt debt counseling and student loan forgiveness programs to help reduce employee stress.

·      Expand and change the use of voluntary options to keep benefits offerings competitive for a diverse set of employees. Examples include:

–       Critical illness coverage,

–       Legal services,

–       Identity theft protection, and

–       Commuter benefits.

Deadline Extended to Provide ACA Tax Forms to Employees

The Internal Revenue Service is presenting employers with a gift by extending the deadline during which they are required to furnish essential Affordable Care Act-related forms to their employees.

Applicable large employers (ALEs) to whom the ACA employer mandate applies will now have until March 4, 2019 to furnish their employees with Forms 1095-B and 1095-C for 2018. The old deadline was Jan. 31, 2019.

Also, the IRS is extending relief from penalties to employers who file or furnish incorrect or incomplete statements if they can show they made a good-faith effort to comply.

ALEs with 50 or more full-time and full-time-equivalent employees are required under the ACA to file and furnish certain forms every year. The forms relate to the health coverage, if any, that the employer offers to its full-time employees.

Entities are required to report information to the IRS, as well as furnish statements containing similar information to individuals.

Forms 1095-B and 1095-C are sent to employees who receive employer-sponsored health insurance.

IRS regulations generally allow for 30-day extensions on an individual employer basis. However, in light of the current guidance, no additional extensions will be provided for the 2018 reporting year.

Deadlines for reporting to IRS unchanged

Deadlines for reporting to the IRS using Forms 1094-B, 1095-B, 1094-C and 1095-C remain the same and reporting must be done by Feb. 28, 2019 if using paper, or by April 1, 2019 if reporting electronically.

Huge Investigation Uncovers Possible Generic Drug Pricing Cartel

An investigative report by the Washington Post has uncovered an alleged cartel among generic drug manufacturers to fix the price of some 300 medications, adding new fuel to the debate about raging price increases in the pharmaceutical industry.

While a number of name-brand drug makers have been named and shamed for their massive price increases – sometimes hundreds or thousands of percent higher – the article looks at how something similar has been going on in the generic drug market.

A case that started as an antitrust lawsuit brought by two states has spurred a massive investigation into alleged price-fixing by at least 16 companies that make 300 generic drugs. Now 47 states are party to the lawsuit, seeking to recoup perhaps billions of dollars.

In addition, pharmacies and other businesses have filed their own lawsuits against the generic drug makers. One such suit documents huge price hikes – like a 3,400% increase in the price of an anti-asthma medication – and investigators believe that generic drug producers colluded to raise prices in tandem or not make their products available in some markets or through specific pharmacy chains.

The scale of the alleged collusion was summed up by Joseph Nielsen, an assistant attorney general and antitrust investigator in Connecticut, whose office has taken the lead in the investigation: “This is most likely the largest cartel in the history of the United States,” he told the Washington Post.

If the allegations are true, the parties affected run the gamut from consumers, who have high copays or high deductibles for their pharmaceuticals, to hospitals and insurance companies. And many health industry observers were surprised to learn the news, considering that generics are supposed to be a safety net for patients to ensure access to quality medications at a reasonable price.

Two former executives of one generic drug maker, Heritage Pharmaceuticals, have pleaded guilty to federal criminal charges. They are now cooperating with the Justice Department.

The article describes the coziness among executives from competing generic drug makers and how they would allegedly collude to raise prices.

There has been no estimate of how much the generic drug companies allegedly overcharged over the years, but even if it’s a fraction of the annual sales of $104 billion a year, it would be substantial.

The drug makers that the Washington Post was able to reach denied the allegations.

Coordinated price hikes ‘almost routine’

The generics industry used to be highly competitive, according to the story, but over the years, things changed and suddenly allegedly “coordinated price hikes on identical generic drugs became almost routine,” the Post wrote.

The alleged price-fixing affects 300 generic drugs, according to the report. Generics account for 90% of the prescriptions written, however they only account for 23% of the total drug spend in the country, according to the Association for Accessible Medicines.

And still, the prices of on a benchmark set of older generic drugs in the Medicare prescription-drug program dropped 14% between 2010 and 2015.

But, for the 300 drugs in question, prices went up, according to the lawsuits. That’s why pharmacies have also come to the fore to sue. They were on the front lines when they started noticing marked increases of hundreds of percent in the prices of some generic medications.

If the collusion turns out to be true, it essentially reverses the possible gains when a generic drug enters the market. According to the Federal Drug Administration, prices fall up to 50% when a second generic enters the market. And once there are six or seven companies making the same generic drug, the price usually falls 75% from the original cost of the brand name pharmaceutical.

Health Care Most Pressing Issue for the U.S., Workers Say

What is top of mind for your employees? Most likely it’s health care.

A new study by the Employee Benefits Research Institute and market research firm Greenwald & Associates found that workers rank health care as the most important issue facing the country.

The survey found that 26% of workers ranked health care as the most important issue in the nation, followed by immigration at 18%, the role of government (16%) and jobs (13%).

Here are some other findings that employers should take note of:

  • 74% of workers cited health insurance as one of the top three most important benefits that they consider when looking for work.
  • 52% of workers cited a retirement savings plan as one of the top three most important benefits that they consider when looking for work.
  • 47% of workers said they were extremely or very confident about their ability to get the health treatments they need today.
  • 34% of workers said they were confident about their ability to get needed treatments over the next 10 years.

The fact that workers ranked health care the top problem in the country should give employers pause before they consider tinkering with benefits and shifting more of the cost burden onto their employees. And overall, it shows workers are concerned about their own ability to get the treatment they need under their current health plans.

What this means for you is that you should work with us to explore the latest options available in the marketplace to reduce costs while not cutting into the quality of care.

And as an employer, you should consider the current mindset of employees about their current health plans and how they are using their health benefits:

  • 20% of workers surveyed were extremely or very satisfied with the cost of their health insurance plan, as well as the costs of health care services not covered by insurance.
  • 48% reported experiencing a rise in health care costs over the past year, (that’s less on average than what was found in previous surveys).
  • 63% said higher costs had prompted them to exercise more and eat healthier foods.
  • 51% said higher costs had prompted them to choose generic drugs more often.
  • 45% of workers said they had delayed going to the doctor for symptoms that arise.
  • 50% said they only went to the doctor for more serious conditions or symptoms.

Despite those findings, many workers are happy with the quality of the health care they receive under their health plans:

  • 82% of workers said they were extremely, very or somewhat satisfied with the quality of the medical care they receive.
  • 50% of workers said they were extremely or very satisfied with their current health plan, and more than a third are somewhat satisfied.

The takeaway for employers
What you can take away from this survey is that in order to retain and keep talent, you need to ensure you have a solid health plan that doesn’t saddle your workers with too much of the cost burden. You should work with us to find the most cost-effective plans with good networks for your employees.

As the job market remains hot, it’s imperative that you don’t go with the same plan year after year. There are options to consider that can provide your workers with better care and less expensive services, such as telemedicine and health clinics.

As More Employers Rethink High Deductible Plans, They Tackle Other Costs

A new study has found that more and more large employers are ditching high-deductible health plans as the job market tightens and they need to boost improve their health insurance offerings to retain and attract talent, and saddle their employees with less of the cost burden.

The change is also in response to the increasing burden that’s been placed on workers in employer-sponsored health plans after a seismic shift over the last decade to high-deductible health plans. HDHPs – also known as consumer-directed plans – were also expected to put more responsibility on employees to shop around for the most cost-effective medical services, but those expectations have not materialized.

This year, 39% of large, corporate employers surveyed by the National Business Group on Health offer HDHPs as their workers’ only choice. For 2019, only 30% of employers surveyed said they would solely offer HDHPs.

Pundits also say that some companies are boosting other options because of the continued postponement of the “Cadillac tax” on pricey health plans as it looks more and more likely that the tax will be scrapped and never take effect.

While nearly 40% of large employers offered only HDHPs in 2018, just 29% of U.S. workers are in HDHP job-based plans this year, the same level as in 2017, according to the Kaiser Family Foundation. That’s the highest level ever since the plans were introduced about 13 years ago.

The plans have allowed employers to shift more of the cost burden to their employees by requiring them to have more “skin in the game” in terms of their health care expenditures. But that notion failed because most health care is unplanned and requires fairly quick treatment, which makes it more difficult to shop for the provider that charges the least.

Over the years, the up-front premium cost employees pay has risen, but so have deductibles in these plans and deductible levels have increased faster than wages. In fact, 25% of workers have a single-person deductible of $2,000 or more, according to the Kaiser Family Foundation.

The average total health insurance cost is nearing $15,000 per employee, and the average worker pays $5,547 of that every year.

Other ways employers seek to lower costs

As costs increase, more employers are trying to find other ways to shave costs instead of shifting more deductibles and premium costs to their workers. Some of the ways the National Business Group survey found employers are trying to tackle costs include:

  • Managing expenses for the most expensive diseases – This can include cancer, terrible accidents, prematurely born babies and other diseases. Treatment for many of these afflictions can cost $1 million or more. This is being done through accountable care organizations and “centers of excellence” that the insurer contracts with to focus on specific treatments.
  • Using more technology – This can include workers using nurse video-chat services and other types of telemedicine.
  • Using primary care clinics – Some insurers and self-insured employers are contracting with primary care clinics nearby their offices so that employees can get common ailments treated quickly.
  • Tackling pharmaceutical costs – Nearly all of the employers surveyed said the prescription drug system needs to be overhauled, drug contracts should be more transparent and the rebate system needs fixing.

Some companies are working with a select few pharmacy benefit managers that can move rebates forward to the point of sale so that employees benefit from the rebate. Thirty-one percent of employers said they are considering implementing point of sale rebates in the next few years.

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