Advice on making CDHPs work for employers and employees alike.
By Sandy McCarthy
In this volatile era of healthcare reform, employers and employees face waves of change and complication.
These include new reporting and coverage requirements, expanded regulations, a looming excise tax (to begin in 2018 on so-called “Cadillac” healthcare plans), and the need for employees to become more informed healthcare consumers.
Indeed, the total health benefit cost per employee in 2014 was $11,204, a growth of 3.9 percent over the previous year, according to Mercer’s 2014 Healthcare Survey. Even if the rate of healthcare inflation remains slow to moderate, the cost increase remains significant. As another open- enrollment season approaches, many companies are turning to cost-shifting initiatives, such as adopting consumer- directed health plans (CDHPs) and expanding spousal and tobacco-use surcharges.
In fact, our research shows that employers are embracing CDHPs in a big way, as part of a cost-effective benefits strategy. According to Mercer’s 2014 National Survey of Employer-Sponsored Health Plans, 66 percent of organizations with more than 500 employees are very likely to offer a CDHP by 2017. This marks a significant jump in the mainstreaming of CDHPs, which have long been part of the expanded benefits repertoire of much larger companies.
But as employers share more of the financial burden of benefits with their employees, it forces employees to make smarter decisions when it comes to medical coverage. Depending on an employee’s needs, the choice of CDHPs can be a very economical one, with lower premiums and HSAs (health savings accounts) that can offset the high deductibles and coinsurance requirements of the plan.
But the wise consumer of CDHPs knows that the emphasis is on catastrophic coverage, and that it is largely up to the consumer to cover the more typical costs of healthcare. Choosing an affordable CDHP may be a no-brainer for many employees, but if they don’t have a clear sense of the potential financial downside of a high-deductible, coinsurance-based plan, they could suffer.
After all, illness and injury are unpredictable at any life stage, and many employees find it challenging to contribute to their HSAs or budget sufficiently for healthcare expenses. With CDHPs, they are responsible for 100 percent of most healthcare and prescription expenses until they hit the high deductible amount, along with a share (10 percent) of in-network medical expenses and prescription co-pays until they reach the out-of-pocket maximum. The financial burden can be a source of distraction for employees as well as negatively impact their perception of and appreciation for employer-sponsored benefits.
So many companies are altering their approach to designing and delivering benefit programs by offering an integrated benefits package that includes voluntary programs alongside traditional core offerings. This can be delivered through traditional benefits administration platforms as well as the private exchange marketplace.
For employees, this amounts to not only a one-stop shopping experience but also an opportunity to bolster their CDHP plans, for example, with voluntary choices
that offer broader protection. Taking advantage of this employer exchanged-based approach, they will pay less for a more robust benefits program than they’d be able to purchase on their own in the private market.
A strong emphasis on employee education and a broad menu of benefit choices can only ensure that the era of healthcare reform and enlightened consumerism pays off for every stakeholder.
Sandy McCarthy leads Mercer’s benefits administration business.