According to Fidelity Investments, a couple retiring this year can expect to spend $285,000 on medical expenses during their retirement. And while the rate of healthcare cost increases has slowed in recent years, Americans are living longer, meaning they will need to address the cost of healthcare for a longer period of time.
The good news is that as we have noted many times, HSAs are becoming more popular all the time and a great way to save for retirement on a tax-free basis. Fidelity reports that their portfolio of HSA owners has grown to more than 830,000 individuals who currently own $3 billion in assets. In addition, consultants say that employers contributed nearly $9 billion to employees’ HSAs in 2018 alone. If our economy remains strong, we can expect these trends to continue. More and more employers will be able to provide matching contributions and funds contributed to HSAs are never taxed.
Employees will be able to save some additional healthcare dollars in 2020 as the IRS will increase the limit on deductible contributions to an HSA by $50 for individuals and $100 for families. The limits will be $3,550 for individuals with self-only coverage and $7,100 for family coverage. The minimum deductible for a qualifying high deductible health plan will also increase, rising to $1,400 for single coverage and $2,800 for family coverage
Research shows that the number of HSAs increased by 13% over the past year, topping 25 million accounts with an anticipated increase to 30 million by 2020. Another important statistic revealed that the average employer contribution to HSAs rose from just over $600 in 2017 to $839 in 2018 – an increase of some 39%. Supporters are encouraging legislators to make HSAs even more consumer friendly by allowing adults over 65 to continue using an HSA to save for healthcare costs in retirement. We will continue to report on these efforts going forward.
While EBRI researchers have reported slower growth rates in recent years, more than 40% of HSA enrollees opened their accounts in just the past two years. Other recent projections, in fact, expect the value of HSA accounts to grow from $54 billion in 2018 to nearly $75 billion in 2020. Proposals floating around Washington could expand the list of HSA-eligible expenses as well as the age at which seniors must stop contributing to their HSA. Proposals like these would make HSAs even more valuable in the future.
The Centers for Medicare and Medicaid Services project that the $3.6 trillion our nation spent on healthcare in 2018 could approach $6 trillion by 2027. If that number has you wondering how your health plan (and our economy) can possibly survive such an increase, you’re certainly not alone.
Fortunately, you and your employees have an employer-sponsored health plan to depend on. And if your plan is self-funded like most, you have the freedom to determine how best to spend your healthcare dollars and the flexibility to respond to member’s needs. So rather than worrying about things that are out of your control, let’s look at steps others are taking to get more bang for their benefits buck.
Health Savings Accounts have become a must for employers pushing high deductible health plans. Contributing $500 or more to HSAs softens the impact of higher deductibles, and helps plan members cover out-of-pocket expenses and save for future healthcare expenses.
Covering the cost of Preventive Drugs at 100% is another option to consider. More and more employers are finding that waiving these copays can help speed recoveries and avoid some serious health problems that can cost everyone more down the road.
More Personalized Communication is the only way to deal with the reality that even with the availability of web portals, mobile apps and online transparency tools, health benefits are complex and confusing. Employers simply must do more to help members find out about their health benefits and understand them better. A public facing website could be a great way to not only explain your offerings to members, but also help to attract and retain qualified talent.
Direct Primary Care and requiring the use of Alternative Sites of Care for certain high-cost surgeries or second opinions are also discussed in this newsletter. TPAs have been recommending these strategies to many self-funded health plans in recent years and both are beginning to show positive results, depending on the makeup of the employee population.
Reference Based Pricing and Worksite Wellness programs are options we have discussed at length in recent years and both can be extremely effective. To learn more about these options and for other ideas you may want to place on your radar screen, contact your account representative. Spring is the perfect time to start thinking about next year!
A fee-based model that gives individuals unlimited access to a primary care physician without their insurance being billed is being heralded as the right prescription for healthcare. Most patient needs, such as consulting, tests, drugs and treatment are included, and no insurance billing is involved.
Sources estimate there are about 1,000 direct primary care practices in the continental United States. While most patients pay for the service out-of-pocket, more and more employers are choosing to offer this as a benefit and sharing in the cost.
TPAs and advisers supporting the trend caution that direct primary care is not a replacement for insurance, but rather a great supplement to an existing health plan. By removing the barrier of costly copays and deductibles, employees can forge a much closer relationship with their doctor, making them far less likely to choose a costly emergency room or urgent care clinic when the need for medical care arises. Direct primary care is an option that is growing and one we’d be happy to talk with you about at your convenience.
CNBC recently featured a story about Walmart and their history of not only suggesting that employees visit Centers of Excellence for surgeries and second opinions but flying them all expenses paid. The case study revealed that between 2015 and 2018, more than half of their employees suffering from spine pain were able to avoid surgery by seeking treatment at Mayo Clinic.
Shorter hospital stays, lower readmission rates, fewer episodes of postsurgical care and a faster return to work were other benefits gained when results were compared to patients who chose other hospitals for treatment. Walmart reported that even though they spent more per surgery at Mayo Clinic than what other hospitals were charging, they saved money because of better outcomes and surgeries that were avoided.
While many employers use health screenings and health risk assessments to detect medical conditions early on, some have a difficult time determining the value of these wellness-related measures. Some compare the costs of testing to an estimated cost of medical claims, but in an effort to determine a more accurate return on investment, others are taking factors such as reduced absenteeism and increased overall productivity into consideration. It makes sense since improving overall health and productivity really is the objective of wellness programs.
As reported by The Phia Group on March 29, 2019, a federal judge in Washington, D.C. ruled that the new Department of Labor rules expanding the marketing of Association Health Plans (AHPs) violate existing law. TPAs, brokers and employers see this as a significant blow to AHPs, especially new self-funded AHPs that have been preparing to launch on April 1, 2019.
Federal Judge John Bates sided with several states that took issue with the DOL’s final rules several months ago, arguing that a broad availability of AHPs is not within the scope of ERISA, which defines an employer as having at least two or more employees. The final rules were going to allow small employers, including working business owners (employers of one), to join with others based on either common geography or industry affiliation to form an AHP. It appears that the Judge’s ruling means that both criteria, geography and industry affiliation, must be met and that qualifying employers must have a minimum of two employees.
Thus far, we are not aware of any response filed by the DOL. We will continue to monitor reactions to the ruling and other developments regarding Association Health Plans.
The rule requiring hospitals to post their prices online, which became effective on January 1, 2019, really hasn’t done much to promote cost transparency. The problem is that the price lists, which payers refer to as chargemasters, break common procedures into complex, coded retail-priced components that mean little to the average consumer.
As an example, determining the cost of an ER visit would require knowing the codes and locating costs for all parts involved in the visit. Few people, if any, are familiar with these complex details. While giving consumers price information in an easy-to-understand format would be a big help, it appears that CMS Administrator Seema Verma was accurate when she described this as little more than a “critical first step”.
According to a public-private partnership launched by HHS, the percentage of U.S. healthcare payments tied to value-based care rose to 34% in 2017, a 23% increase since 2015. Fee-for-service Medicare data and data from 61 health plans and 3 fee-for-service Medicaid states with spending tied to shared savings, shared risk, population-based payments and bundled payments were examined in the analysis.