A look ahead at 2016 health care trendsArticle added by J. Keith Pellerin on January 25, 2016
Keith Pellerin

J. Keith Pellerin

Joined: October 22, 2015

2015 brought constant change to the health care industry, and it looks as though the same can be expected for 2016. While it can be hard to predict exactly what will happen in the new year, brokers who are able to educate themselves and become experts on topics that impact their clients will continue to have opportunities to position themselves as trusted advisers.

Understanding the challenges businesses will face means having a handle on the trends that will continue to shape the health care industry. For the upcoming year, these include the role of private exchanges, changing health care regulations and products that provide workers with financial security. As the New Year is off with a bang, be sure to take note of these trends which will be creating waves in the near future.

Health exchanges take center stage

Health insurance exchanges are now part of the benefits equation. However, it’s private exchanges specifically that will continue to grow in popularity. According to an Accenture report, enrollment in private exchanges has doubled from 3 to 6 million in one year and is projected to double again in 2016. Unlike the government exchange, private exchanges offer the ability to customize plan options and provide employees with a variety of choices that fit their unique circumstance. For example, voluntary benefits such as accident or hospital indemnity coverage can be offered on a private exchange, but not on a government exchange.

It is important to note that making more options available for workers also increases the likelihood of workers making mistakes. In fact, 25 percent of employees who went through private exchanges selected less coverage than they previously had, leading to lower monthly premiums, but it also resulted in higher out-of-pocket costs.1 Therefore, it’s important for benefits advisers to provide guidance along the way because many employees may unknowingly add to their health care costs.

As clients are pulling together their benefits strategy for 2016, help them understand and decide if a private exchange platform makes sense for their business needs. Also, remind clients that it could be cost-effective to provide employees with a stipend to purchase health insurance from an exchange instead of providing a full benefits package. Not only will employees be able to select benefits that make the most sense for their situation, but your clients could save money while ensuring their employees have good health care coverage. This strategy is especially useful to employers who want to remain mindful of their bottom line.

New strategies to adhere to health care regulations

Companies are continuing to research different options to help control health care costs. With a lot of the financial burden being shifted to employees, and as health care regulations continues to roll out, some businesses are relying heavily on benefits advisers to stay ahead. That said, the Cadillac Tax will likely dominate the health care conversation until it is fully implemented in the coming years.

In an effort to slow the growing rate of health care costs, the Cadillac Tax will impose a 40 percent tax on the portion of a health care plan that exceeds the threshold of $10,200 a year for individuals or $27,500 for families, beginning in 2018.2 The purpose of the tax is to encourage companies to level the playing field and offer more cost-effective plans for employees as well as encourage employers to pay employees higher salaries or wages, instead of overinvesting in expensive health benefits, which are currently not taxed.3 These thresholds put a limit on the cost of coverage, which includes the premium for the insured and contributions to flexible spending accounts (FSAs), health savings accounts (HSAs) and certain pre-tax plans. Therefore, many have speculated that employers will begin to eliminate these offerings to avoid the tax all together. However, a recent Mercer survey found that 42 percent of employers were actually considering adding or expanding programs to improve employee health to avoid the excise tax.4
Instead of eliminating offerings completely, brokers can advise clients to emphasize preventative care, disease-management or other wellness programs in an effort to reduce costs associated with health care. Wellness programs help employees become healthier and reduce chronic illness. Healthier employees can mean fewer trips to the doctor, a reduced need for expensive health plans and decreased out-of-pocket costs, which also means a lower chance of your clients being penalized under the Cadillac Tax, even for their employees who may depend on more expensive plans because of their age or medical history.

Increased need for financial security

As expenses continue to rise, products that help workers prepare for and survive financial ruin will continue to be in high demand. Even though employees now have more benefits choices available to them, they still aren’t prepared to take on increasing out-of-pocket health care costs. According to the latest Kaiser Family Foundation analysis of employer health benefits, average deductibles have increased by 255 percent since 2006.5 Additionally, according to a Consumer Reports study, consumers have seen their monthly out-of-pocket prescription costs increase by more than double.6

Voluntary products protect your clients’ employees by providing an extra layer of financial protection. For instance, critical illness policies are becoming more popular because they pay cash benefits to help protect workers from financial vulnerability in a way that dental and vision policies simply do not. Unlike major medical insurance, voluntary policies pay cash benefits directly to the policyholder, unless otherwise assigned, if they get sick or injured.

Also, it’s no secret that more workers understand the value of voluntary products as a financial safety net. A recent Aflac survey showed that 64 percent of employees see a growing need for voluntary insurance today when compared to years past; of those employees, 56 percent cited increasing deductibles and co-payments as their reasons. Emphasize to clients that these policies are a win-win, since they come at no cost to the employer.

Ring in 2016 with an eye on the year ahead

As we go full force into the New Year, and the health care landscape continues to change, brokers need to keep key trends in mind as they have benefits conversations with business owners. Many employers are still on the fence regarding private exchanges and their effects on their business, and they have questions about what new health care regulations will bring and are looking for feedback about which benefits they should offer employees. It is important to use your knowledge of these health care trends to continue positioning yourself as a trusted adviser and more importantly a vital part of the benefits selection process.

1. Accenture, “Enrollment in Private Health Insurance Exchanges Doubled, to 6 Million in 2015, According to Accenture,” April 7, 2015, accessed Oct. 29, 2015 - https://newsroom.accenture.com/industries/health-public-service/enrollment-in-private-health-insurance-exchanges-doubled-to-6-million-in-2015-according-to-accenture.htm

2. Bloomberg BNA, “Employers May Cut FSAs to Dodge Cadillac Tax,” Sept. 28, 2015, accessed Oct. 13, 2015 - http://www.bna.com/employers-may-cut-b57982058830/

3. International Business Times, “What Is The Cadillac Tax? A Simple Explainer On Health Insurance Levy And Why People Are For Or Against It,” Oct. 8, 2015, accessed Nov. 5, 2015 - http://www.ibtimes.com/what-cadillac-tax-simple-explainer-health-insurance-levy-why-people-are-or-against-it-2133304

4. Mercer, “The winning streak continues as employers predict another year of low health benefit cost growth,” Sept. 16, 2015, accessed Oct. 13, 2015 - http://www.mercer.com/newsroom/The-winning-streak-continues-as-employers-predict-another-year-of-low-health-benefit-cost-growth-in-2016-mercer-survey.html

5. Kaiser Family Foundation, “2015 Employer Health Benefits Survey,” Sept. 22, 2015, accessed Oct. 29, 2015 - http://kff.org/report-section/ehbs-2015-summary-of-findings/

6. Consumer Reports, “Are you paying more for your Rx meds?” Aug. 13, 2015, accessed Oct. 29, 2015 - http://www.consumerreports.org/cro/news/2015/08/are-you-paying-more-for-your-meds/index.htm
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