By: Michael Lujan @mdlujan | Limelight Health Chief Strategy Officer and Co-Founder
In the US, we spend a small fortune on employee benefits. US health care expenditures are reaching closer to 19% of our GDP, and ranks among the least efficient systems in the world (50th out of 55 nations, to be exact). For most employers, it’s the second largest expense after wages. Every year, employers are challenged to re-think their role in providing competitive benefits and exploring the constantly evolving resources and strategies to better manage costs and deliver a better experience for their changing workforce. In 2015, Millennials surpassed Baby-boomers as the largest percentage of the workforce, so it makes sense that technology and non-traditional benefits would become more popular and in demand in 2017.
The employee benefits brokers and agents who serve this space have been busy trying to keep up, investing in technology and introducing new product solutions and strategies, while also getting trained on ACA compliance and new health reform laws. And just when benefits brokers and agents mastered the details and got expertly-credentialled, the new administration promises to change it all again.
2017 promises to be a very busy year for benefits professionals and anyone else trying to provide or maintain coverage. Here’s my short list of benefits-related issues I believe should be on their minds, with links to data and articles from respected thought leaders:
1.) The Affordable Care Act – Passed into law in 2010 and implemented in stages, the ACA or Obamacare changed the way health insurance and benefits were offered and what was or wasn’t covered. Depending on where you are and the size of your company, premiums went up but increases might have slowed to closer match the pace of inflation in 2014 and 2015. For many small employers, their Q4 2016 renewal increases were steep and reflected the compounded impact of delaying a renewal into ACA-compliant group plans with their essential health benefits. For larger employers, the average increase is expected to average around 6% in 2017, according to NBGH. 2017 will be the year of “repeal and replace” under a new administration, who already signaled that it may require a lengthier transition. Until or unless the new rules say otherwise, employers will still need to comply with ACA reporting and other obligations although some experts believe the employer mandate, 1094/1095 reporting and the Cadillac tax will be eliminated in 2017. Where this is all going will become clearer in the coming weeks and months. The incoming Congress will address their plan to dismantle the Affordable Care Act and will get a House floor vote the week of Jan. 9th. Stay tuned.
2.) Insurance Technology – 2016 was a big year for benefits technology aimed at improving the shopping and enrollment experience for employee benefits. 2017 will continue this trend and the tools and options are more robust and ubiquitous. Every benefits broker in the US now has access to all-in-one technology for online enrollment, payroll and human resources (on/off-boarding). More than $3.5 billion dollars was invested in InsurTech startups between 2014-2016 so more products are coming to market in 2017. The digital health invasion includes some long-awaited tools to better manage health, cost transparency, and drive the paper and waste out of the healthcare and insurance systems. Insurance carriers, brokers and employers alike will have more health and benefits-related tools than ever. Shop wisely and compare more than just price.
3.) Supplemental and Non-traditional Benefits – Average deductibles have increased over the years leaving huge gaps and greater share of costs for employees. If you are not already, consider offering gap coverage, critical illness and other supplemental and voluntary coverage to help fills the gaps.
Aflac’s 2016 Open Enrollment Survey of 1,900 employees shows that nearly half (53%) selected a health plan with a deductible of $1,000 or more. For 57% of these employees, it was their only choice.
Also, 65% of Americans own at least one pet so it makes sense why pet insurance is now the hottest growing employee benefit. 59% of large employers already offer telemedicine and more are including identify-theft protection, and paid time-off buy-sell in 2017 and getting creative about non-conventional benefits. Think about college debt repayment plans, reimbursement for adoption fees, healthy chef-prepared meals at work, laundry services, concert and sport events tickets… Just ask your employees what they really value. (More non-traditional benefit ideas here) and here.
4.) Prescription costs – One of the greatest drivers of health care premiums in recent years has been drugs costs. Most famously, the $94,500 Hepatitis-C cure Solvadi made big headlines in 2014 and drew attention to the rapid increase of specialty drugs. Another example is “Orencia”, a monthly infusion drug for rheumatoid arthritis at $11,000 per month. Specialty drug costs have grown at a rate of 10X the rate of inflation so during the 2015-2016 legislative session, there were at least 80 bills related to controlling drug costs or transparency. Expect to see more legislation and transparency tools in 2017 although the experts at PwC say “Specialty drugs, a big contributor to spending growth in years past, are not expected to have the same impact in 2017. This is because there are no specialty blockbusters expected in 2017, and the impact of the Hepatitis C drugs has ebbed.” Still, the pharmacy lobby is very powerful but so is the will to lower costs. Larger employers should also reevaluate their PBM agreements for more cost-saving strategies.
5.) Individual or Group plans? Effective January 1, 2017, small business owners can use Qualified Small Employer HRAs — also known as qualified HRAs or small business HRAs — as part of their tax-advantaged employer contributions to employees. H.R. 6, or The 21st Century Cures Act was recently passed with overwhelming bipartisan support allowing small employers to offer individual plans to their employees with an HRA, a pre-tax Health Reimbursement Arrangement previously prohibited by the Treasury and IRS. Employers may now compare offering individual plans against their group options.
In general, group products are less expensive with more robust provider networks. The cost drivers are complex. Still, employers may want to consider this new option at next renewal. One big consideration is the less stable individual market and uncertainty looming over the new Trump administration’s replacement plan. Some experts worry the individual market is near collapse and could be even more volatile until the ACA transition replacement plan is clear. For that and other good reasons, most small employers are expected to keep their group policies for now.
6.) Low Insurance and Health Literacy – Nearly half of American adults have difficulty understanding and using health information. Another study from 2013 found that 51 percent of Americans did not understand such basic health insurance terms as premium, deductible, and copay. Lack of understanding impedes adults’ abilities to make appropriate health decisions and increases the likelihood that they’ll incur higher health costs. These literacy gaps cause massive frustration, waste and add an estimated $230 billion a year in health care costs. 2017 can be a breakthrough year for educating consumers, starting with those covered at work. As more tools are developed to help us become more informed and engaged healthcare consumers, it’s estimated every dollar invested in improving literacy can save another $2 in waste. Want to help lower your insurance premiums? In 2017, more employers are expected to invest more time and money in communication tools and engage their employees to become more informed patients and consumers.
7.) Agent Compensation – To help slow or stop new enrollment in unprofitable plans, many insurance carriers have reduced agent compensation to near or literally nothing in the individual market. As most Americans get their coverage through a licensed agent, this means there could be fewer resources to support consumers through the ever-changing insurance market. While these reductions in compensation have not impacted the group market as deeply, this is a real concern for agents who serve both individual and group markets. As this 2016 KFF survey shows, the trend applies to both on and off-exchange plans.
Licensed agents have been the unsung heroes in helping reduce America’s uninsured to an all-time low, often without any compensation at all (for Medicaid and Special Enrollments). Without agents, consumers would be left to navigate the complex marketplace on their own or self-enrollment portals offered by carriers and exchanges.
“Some agents said they would continue to help SEP-eligible consumers enroll in major medical health plans, even if they aren’t paid a commission, because it’s the right thing to do and because they hope consumers will ask for help renewing coverage at the next Open Enrollment, when commissions would apply.”
The demand for health insurance coverage is still high and agents continue to serve individual consumers; some are part-time workers who may not be eligible for their employer plan or aged-off their parents plan. While agents are hopeful the carriers will resume more sustainable compensation, many agents are still making investments in technology and tools to help drive innovation in this evolving benefits market.
Okay. It’s not the most comprehensive list but hopefully, my list prompted readers to think of some issues I missed. Please share your list and contribute to the conversation in the comments below.
Cheers to a happy and healthy 2017!
Michael Lujan is Co-Founder and Chief Strategy Officer for Limelight Health, a San Francisco-based start-up with funding from AXA Strategic Ventures, Mass Mutual Ventures and Launchpad Digital Health. Limelight is a quoting technology platform for health insurance agents, carriers, general agents and private exchanges. Called QuotePad, the SaaS-based technology offers small business benefits quoting with integration with benefits administration and other agency tools.
Michael is Immediate Past President of CAHU (California Association of Health Underwriters<) and current board member of the Silicon Valley chapter. In 2012, Michael helped establish the California Health Benefit Exchange, now known as Covered California. A former agent, general agent and Director of Sales for Blue Shield of California, Michael is an outspoken advocate for the agent distribution channel, small business and the uninsured. Recently named top “30 people to watch in employee benefits in 2017” by Employee Benefits Adviser magazine, Michael now serves on NAHU’s Employer-Based Coverage Working Group. Michael is passionate about helping benefits brokers leverage technology to compete in the evolving benefits landscape.