Health Cost Lookout for 2015 and How to Get Ready for It

With 2015’s open enrollment season around the corner, employees may be holding their breath with concern over next year’s health care costs, but the news may not be as bad as they expected.

True, higher deductibles and costs in prescription drugs may mean employees have to dig deeper into their wallets, but s recent health and well-being survey out of PricewaterhouseCooper’s (PwC) human resource services practice says employers are finding other ways to take the sting out of increased cost sharing.

The survey says medical costs will rise 6.8% next year, outpacing the inflation rate and is the highest increase in the last few years. With that said, Michael Thompson, principal in PwC’s human resource services practice claims employees’ worlds aren’t changing that much.  “Most employees will see more of a gradual change. In the past, we’ve seen health-care costs increase, drop down and then go way back up with dramatic changes. This increase is a blip.”

Plus, the hike may or may not reflect what employees are paying out of their pay checks, Thompson says.

The perception is employees are paying more in premiums even though they may be paying the same percentage of premium they’ve paid in the past, says Paul Fronstin, director of the health research program at Employee Benefit Research Institute. The employer percentage has gone up, too.

When premiums increase, everybody pays, claims Fronstin. It’s with the increasingly popular higher deductibles plans (HDHP) that responsibility falls on employees.

In fact, 44% of employers are considering offering an HDHP as a full replacement to their current health plans and 18% of employers now offer an HDHP as the only insurance option for their employees. More often than not, the deductible—even in network—is $1,000 or more, the survey says.

Experts agree the high deductible price tag could be a hard nut to crack for employees, particularly low-income earners or workers who consume a lot of health care.  Still, “there are ways to make people whole and lessen the sting,” Fronstin says.

For example, HDHPs with health savings account (HSA) compatible plans are the fastest growing plans, the survey finds. Employers that take the HDHPs route may start to contribute more dollars to employee HSAs, particularly in the first year an HDHP plan is introduced, says Fronstin. “Employees may be on the hook the first year, but because untapped funds rollover, employees will have accumulated funds to cover health costs in succeeding years,” Fronstin says.  Employers may also decide to contribute a lump sum to HSAs at the beginning of the year so that an employee doesn’t get caught short if he/she has some costly medical expenses early in the calendar year.

Carve outs, which reduce costs for certain services, can also bring some budgetary relief, explains Fronstin.  For example, a diabetic may get diabetes drugs for free.

Methods like these in tandem with HDHPs provide ways for employers to save money without cutting out on premiums, says Thompson.  “They also encourage employees to take more responsibility for cost of services.”

As more companies look at account-based plans they are also implementing transparency tools on price and quality, Brian Marcotte, president and CEO of the National Business Group on Health says. “People engage differently in managing care.”

To that end, Thompson notes 53% of employers are investing in disease management programs.

There’s also an employer push to expand wellness with 71% of employers offering programs, according to the PwC survey, and about one-third of employers broadening their well-being focus to include financial, emotional, social, community and career well-being.

“The shift from wellness to a broader focus on well-being supports employees in a multidimensional way and ties the success of the business to personal success and satisfaction,” says Thompson. “That’s the real payoff.”

Here’s how to make the most out of choosing your benefits when open enrollment rolls around this year:

Be proactive. Ask the human resources department whether support tools exist within the company or an offered health plan, says Marcotte, and if so, use them. Recognize all resources are not created equal so drill down to find the best opportunities for you to play a more active role in your health.

Be mindful of spousal coverage. Evaluate both your plan and your spouse’s to understand your options, suggests Marcotte. It may make sense for each of you to stay with your company plan.

Drill down to the details. As plan design becomes more sophisticated, especially with consumer incentives, they will also become more complicated and confusing, warns Fronstin. Spend time understanding details upfront; don’t wait until it’s necessary to do so.

Learn from experience. Evaluate and reflect on how well this year’s plan met your needs, Fronstin advises. You might realize you have to make a different plan choice next year.