WORLD CLASS. LOCAL TOUCH.

Volume Nineteen, Issue Six July 2016

We welcome your comments and suggestions regarding this issue of our Benefit Advisor. For more information, please contact your Account Manager or visit our website at www.mma-mi.com.

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Health care reform has become a part of how organizations do business today. The MMA-MI’s and Mercer’s annual surveys indicate employers will continue to offer health plan coverage. Employers, therefore, need to be aware of health plan trends when they plan for 2017. The MMA-MI’s survey shows employers are making plan changes to control health plan costs.

Ninety-eight percent of employers in MMA-MI’s annual survey will likely continue to offer health coverage to full-time employees over the next two years. Similarly, 95 percent of large employers (500 or more employ-ees) in Mercer’s 2015 survey will continue to offer health coverage for the next five years. Employ-ers sponsor health coverage for a number of reasons. Top of the list is retaining and recruiting employees. Not many employers have discontinued their health plans in response to the “play or pay” rules. They are concerned that attracting and retaining key employees will be difficult if they do not offer a health plan.

The recently completed MMA-MI 2016 Southeast Michigan Mid-Market Group Benefits Survey showed that health plan costs increased just 4 percent after employers made plan changes in 2016. This follows a ten-year record low increase of 3 percent after plan changes in 2015.

Nationally, Mercer reported a health plan cost increase of 3.8 percent after plan changes for 2015. Participants in Mercer’s survey expect a cost increase of just over 6 percent in 2016. Employers expect to reduce this increase to 4.3 percent on average after they make various plan changes.

Both the MMA survey and the Mercer survey show a wide range in cost increases. Local-ly, the lowest quartile showed a 0 percent increase or even a decrease from 2015 to 2016 after plan design changes. Nationally, 31 percent of large employers’ cost stayed flat or even declined. Seventeen percent of employers’ cost increased at 10 percent or

HEALTH PLAN TRENDS

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more. Both surveys seem to in-dicate that employers trying more strategies to control costs are having the most success. Employ-ers using a range of cost-control options are seeing better results.

The Affordable Care Act (ACA) continues to affect employers and their health plans. Some employ-ers did see more employees electing coverage when the individual mandate took effect. Some have had to cover more employees because of the requirement to define full-time as 30 hours a week. Employers are also concerned about the potential impact of the Cadillac tax. The effective date has been pushed to the 2020 tax year. However, some employers are on pace to exceed the allowed thresholds. These employers are starting to carve back health plan benefits now to bring costs under the allowed thresholds by 2020.

This year we continued to see employers shift costs to meet budget targets. However, some employers are becoming concerned that they may be shifting too much cost to employees. As a result, these employers are adopting incentives for cost-effective treatment venues, narrow net-works, reference-based pricing and centers of excellence. Their focus is on cost control strategies that allow employees options to maintain out of pocket cost, rather than annually shifting more cost to employees.

This Advisor reviews the following health plan trends and cost- control issues:

• Issues affecting medical care and costs

• Strategies employers use to control health plan costs

It compares the results of MMA-MI’s 2016 Southeast Michigan Mid-Market Group Benefits Survey to our national benchmark, Mercer’s 2015 National Survey of Employer-Sponsored Health Plans. The Mercer data reflects employers with 500 or more employees. Both sources provide specific data on what employers are currently doing to keep health plan costs in check.

ISSUES AFFECTING MEDICAL CARE AND COSTSHealth plan costs are approaching unsustainable levels. While trend increases have been in single digits over the last decade, even single digit increases represent

significant dollars for most organizations. Many employ-ers are pushing more cost to employees by changing plan design or increasing employee con-tributions. Some

employers feel they can’t continue this cost shift. While plans meet ACA minimum value and affordability rules, employers are concerned employees can’t afford needed care.

For that reason, employers are looking more closely at the factors contributing to increased health plan cost. If they can choose

cost control strategies geared to issues that are pushing up costs, perhaps they can influence health trend over time.

The following factors may affect health plan costs:

• Our aging workforce and poor lifestyle choices. As employees age, they tend to require more health services. Over time, poor lifestyle choices tend to contribute to ongoing health conditions. Health issues are responsi-ble for a sizable portion of health plan costs:

– Chronic Conditions: The number of Americans living with one or more chronic diseases increases every year. According to the Centers for Disease Control and Prevention (CDC), chronic diseases accounts for 86 percent of our nation’s health care costs. Chronic condi-tions lead to additional spending on office visits, diagnostic ser-vices and prescription drugs. As employers shift more cost to em-ployees, they should be concerned that employ-ees may forgo some treatments because of the cost. Serious complications that require expensive treat-ments may arise as a result.

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– Lifestyle choices: Lifestyle decisions influence health care needs. Smoking, poor nutrition, sleep depri-vation and a sedentary lifestyle are all choices that adversely affect a person’s health. These choices can also be a factor in chronic disease. Ultimately, the result is higher health plan costs. Smoking, poor nutrition and sedentary lifestyles are the focus of many employer-sponsored wellness efforts. Sleep deprivation is getting more attention be-cause it affects health and safety. The CDC recommends that adults get between seven and nine hours of sleep each night. Roughly 30 percent of Americans, however, report sleep-ing six or fewer hours a night. About 70 million Americans suffer from chronic sleep problems. Sleep deprivation can lead to injuries, chron-ic diseases, mental illnesses, poor quality of life, increased health care costs, and lost productivity. Sleep problems are often a hidden cause of overall poor health, including obesity. Insufficient sleep can also adverse-ly affect metabolism, im-mune system function, mood and safety.

• Shortage of primary care physicians. A relationship with a primary care physi-cian helps employees seek cost effective care. With

more people insured, prima-ry care physicians face new pressures as their patient bases expand. Although it may be difficult to find a primary care physician, employees should have their own doctors. Some employees resort to more expensive urgent care or emergency rooms for non-emergencies because they can’t get an appoint-ment with a primary care physician.

• Our complex health care system. Patients with seri-ous health conditions often strug-gle to find appropriate treatment or get a sec-ond opinion. Second surgical opinions are important for certain surgical treatments. For example, treatment for back pain does not always warrant surgical treatment; physical therapy may be more effective than surgery. A second opinion may provide a non-invasive option that first physician did not provide.

• Health care provider consolidation. Physicians need to balance health care reform requirements, potential cuts in Medicare reimbursements, increasing Medicare compliance responsibilities, an increased Medicaid patient load, and care liability is-sues. Because government requirements are becoming more onerous, maintaining an independent medical

practice is becoming more difficult. As a result, many doctors are consolidating their practices or working within a local hospital physician group. This consolidation may affect negotiating power. However, it can also be beneficial as insurance car-riers try to change payment rationales. Consolidations help if a carrier wants to focus on patient-centered medical homes (PCMH). Physicians that are part of a PCMH are financially re-

warded for providing high quality, effective care. They spend more time making sure patients comply with treatment plans, go for prescribed

therapy, get recommended preventive care and take maintenance medications as directed. Hospitals are facing new, complex administrative issues as well. Medicare is looking at new payment arrangements that focus on quality. The Department of Health and Human Services (DHHS) seeks to have 85 percent of Medicare payments tied to quality or value by 2016 and 90 percent by 2018. Because these quality initiatives require more administrative tasks and reporting, they burden health care providers. Hospital consoli-dations are also expected to

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continue. They may reduce competition and thus affect discount negotiations with various PPO networks.

While the factors influencing health care cost are complex, employers may be able to ad-dress them through plan design. For example, they may launch a value-based pharmacy plan for employees with diabetes, high blood pressure, heart conditions and asthma. The lower copays may encourage employees to take their medications as prescribed. Employers may also invest in wellness initiatives to improve employee health. A wide range of strategies exists for helping employers control health plan cost.

STRATEGIES EMPLOYERS ARE USING TO CONTROL HEALTH PLAN COSTSEmployers must annually review their health plan costs and project-ed increases. Many made a num-ber of changes in 2016 to meet their budget targets. In Southeast Michigan, survey participants re-ported a 4 percent increase after plan changes in 2016. National-ly, the 2015 increase after plan changes was just under 4 percent.

This year employers considered a number of options to meet budget targets. Consumer driven health plans (CDHPs) and wellness con-tinue to be lead strategies locally and nationally. Locally, MMA-MI 2015 survey respondents made a number of plan changes in 2016, with several median plan design amounts increasing. Locally and nationally employers turned to newer options, such as patient advocate programs and telemed-icine.

PATIENT ADVOCACY & TELE-MEDICINEPatient advocate programs steer employees and family members through the health care system. They help with handling claims, finding specialists, researching cost and explaining medical tests and screenings. Twenty-nine percent of local employers of-fered employees a patient advo-cate program. Fifty-six percent of large employ-ers nationally offered patient advocacy programs to employees in 2015.

Telemedicine allows employees to consult with a physician electroni-cally for routine illnesses, such as sinus infections, ear infections, or urinary tract infections. A tele-phone visit is easy to schedule and convenient to use. It costs roughly half of the usual fee for an office visit to a primary care physician. Thirty eight percent of local employers offered telemed-icine in 2016. Nationally in 2015, 30 percent of employers offered employees telemedicine.

CONSUMER-DRIVEN HEALTH PLANS (CDHPS) CDHPs increase participants’ out-of-pocket costs for services. Most employers offer a qualify-ing high-deductible health plan (HDHP) paired with a health savings account (HSA). HSAs are individually owned, tax-favored trust accounts that employers and employees can fund. The IRS rules for HSAs require the account holder to be enrolled in a qualify-ing high-deductible health plan. A number of criteria determine

whether a given high-deductible health plan qualifies.

In theory, CDHPs are designed to control costs. Members will make more cost-effective treatment decisions because they pay a greater share of the cost. Independent studies support this

theory, indicat-ing that CDHPs can result in savings ranging between 5 and 14 percent.

The MMA-MI survey indi-cates that 47 percent of employers

offered a CDHP in 2016. This is up from 43 percent in 2015. Only 7 percent of employers make a CDHP their only health plan. GM adopted this aggressive strategy for its salaried workforce several years ago. Some employers have followed GM with this aggressive strategy, but it has leveled off in 2016.

Nationally, the number of CDHPs increased dramatically in 2015 among large employers. For employers with 500 or more employees, 59 percent offered a CDHP in 2015. This was up from 48 percent in 2014. Only 10 percent of national employers adopted the aggressive strategy of offering only CDHPs to their employees.

Nationally, the lower cost of CDHPs with HSAs was likely a factor in their dramatic growth last year. CDHPs with HSAs cost roughly $2,400 less per employee

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per year than PPO plans. The gap is even greater for HMO plans. CDHPs have historically trended at a rate slightly lower than PPOs nationally. This year, the percentage increase was high-er. CDHPs with HSAs increased 5.5 percent while PPOs only increased 4.4 percent in 2015.

Locally, the cost of CDHPs with HSAs differs from other plans. HMOs are the generally the lowest cost plan for family coverage and the second lowest cost for single coverage. CDHPs without em-ployer HSA funding are the lowest cost for single and second lowest for family coverage. CDHPs with employer HSA funding are the third lowest cost. CDHPs with HSAs that have some funding from the employer only increased 1.5 percent in 2016. The higher increase in the national market is likely due to an influx of new CDHPs. However, employers should keep an eye on trend increases in CDHPs as they compare with in-creases in other plan types.

Locally and nationally, we did see some changes in the median plan designs for CDHPs, but they had remained fairly stable for the last five years. In 2015 nationally, the median single deductible increased to $1,800 and the family deductible increased to $4,000. Seventy-two percent of large employers made a contribution to employees’ HSAs. The median amount has stayed steady at $500 single and $1,000 family. This means the increases in deductibles were passed directly to employees. The employee liability after em-

ployer contributions to the HSA is $1,300 single and $3,000 family.

We saw changes locally as well this year. Our median single deductible increased to $1,800 and the family deductible increased to $3,600. Locally, only 57 percent of employers contrib-ute to employees HSAs. The median contribution to the HSA has stayed steady at $500 single and $1,000 family. Again, the deductible increases were passed directly to employees. The employee liability after employer contributions to the HSA is $1,300 single and $2,600 family.

Employers that fund part of the HSA have an additional cost- control strategy in their arsenals. They can choose to adjust HSA funding levels annually in re-sponse to cost increases, economic realities, wellness activities or business perfor-mance. A component of their

plan costs can be modified independent-ly from the CDHP design or employee contributions. Employers may also choose to stop funding HSAs after the plan has been

in place a number of years and employees have had an opportu-nity to build up their HSA account balances.

CDHPs were once a cutting edge benefit option that seemed too drastic to survive as an employer plan option because they push liability and responsibility onto employees. These plans have become more commonplace in the last five years. Interestingly, in 2015, twenty-eight percent of

employees enrolled in CDHPs nationally. Local enrollment growth has lagged. Only 20 percent of local employees elect CDHP coverage.

EMPLOYEE WELLBEINGWellness plans have remained steady nationally and in Michigan. This year 78 percent of MMA-MI’s survey participants offered some type of wellness program. Twenty-three percent of local employers offered a full-fledged wellness program. These programs typically include biometric screenings, health assessments and coaching to help improve health and lifestyle choices. Employers can offer these wellness programs using either health insurer resources or vendors specializing in wellness programs.

Nationally in 2015, 48 percent of large employers worked with a vendor to provide comprehensive wellness services. Another 34 percent purchased additional wellness services through their health insurance carrier.

Wellness initiatives are in different stages with different employers. Some employers believe in wellness programs and were the first to offer wellness plans. Their wellness commitments have evolved over time. Many of these employers are now focusing on more than simple physical health.

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Volume Nineteen, Issue Six July 2016, Page 6

They are concerned with five facets of employee wellbeing:

• Career• Social• Financial• Physical • Community

Over time, more and more em-ployers may choose to consider employee wellbeing rather than just employee health.

In 2016, local employers offer wellness activities as follows:

• 45 percent offered to all benefit eligible employees

• 32 percent offered to all benefit eligible employ-ees and their spouses

• 9 percent offered only to employees enrolled in the health plan

• 14 percent offered only to employees and spouses enrolled in their health plan

Incentives are critical. Locally, our survey data shows incen-tives do encourage employees to participate in wellness. For the 66 percent of employers offering incentives, the employee partici-pation rate is between 76 and 99 percent. The 34 percent of employers that do not offer incentives achieved less than a 25 percent participation rate.

Southeast Michigan incentives for wellness increased significantly in 2016. Where the incentive is a reduced premium contribution for the health plan, the dollar amounts average $479 a year for single coverage and $803 for family coverage. The straight cash incentive is significantly less. In 2016, the average cash incen-tive amount was $244 annually.

Nationally, incentive amounts were reported by activity. In 2015, fifty-four percent of employers reduced premiums by a median of $360 if employees completed a health assessment. The median cash incentive was $50. Forty percent of employers reduced premiums by a median of $415

to complete a biometric screening. The median cash incentive was just $50. Twenty seven percent of em-ployers reduced premiums by a median of $360 to participate in

a lifestyle coaching program. The median cash incentive was $100.

Ninety percent of southeastern Michigan employers use an incen-tive rather than a penalty. Incen-tives seem to be more successful. Tobacco surcharges remained fairly steady in southeastern Michigan. In 2016, 14 percent of employers required smokers to pay a median surcharge of $45 a month. Nationally, tobacco surcharges are more common. In 2015, 22 percent of employers required a surcharge for tobacco users. The average amount was $42 a month. Smoke free cam-puses are also popular. Locally, 40 percent of employers have

a smoke free campus this year. Nationally, 68 percent of large employers had a smoke free campus last year.

As employers try to encourage employees to make better lifestyle choices, tobacco surcharges may become more common.

The ACA treats tobacco surcharg-es favorably. Under the employer mandate, at least one plan option must be affordable and meet the minimum value to avoid penal-ties. A plan is affordable if the premium for single coverage does not exceed 9.69 percent of the employee’s household income in 2017. Tobacco surcharges are not included when testing afford-ability. This means employers can use non-smoker contributions to test for affordability.

Outcomes-based wellness programs have not become as popular as many employers ex-pected over the last several years. In general, outcomes-based programs reward a participant for meeting a targeted health goal. Locally in 2016, only 30 percent of employers tied an incentive to achieving a health goal. Nationally in 2015 only 21 percent offered these incentives. Employers need to be careful when they sponsor wellness pro-grams. A number of compliance rules affect wellness plans and incentive arrangements. For more details, please read our Benefit Advisors at http://mcgrawwent-worth.com/wp-content/uploads/BA_Issue_V19_4.pdf and http://mcgrawwentworth.com/wp-con-tent/uploads/MMABA19-5.pdf.

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Volume Nineteen, Issue Six July 2016, Page 7

Not all employers want to spon-sor outcomes-based wellness programs. The difficulty some employees may have reaching health goals may discourage them from even making small efforts to improve health.

Employers may also consider a population health management program. Population health pro-grams collect medical claim, pre-scription plan and biometric data from a number of different sources including the wellness vendor and health assessments. With access to all the data, vendors have a more complete picture of a mem-ber’s current health and potential risks. They can then target efforts to improve each member’s health based on the member’s current health needs. For example, if a prescription for a chronic condi-tion goes unfilled, the vendor may contact the member or physician directly to prevent lapses in taking a necessary medication. Similar-ly, a review of the claims data may indicate a member needs to have a routine mammogram. An out-reach call may again be in order.

Population health management is a more precise, data-driven approach to wellness and health management. Vendors can help with health and lifestyle issues at the member level through a detailed check of a combined data warehouse. They can then target communications to inform mem-bers of health risks and better lifestyle choices. Population health management is popular with employers who want to dig deeper into the data to improve employee health.

PLAN DESIGNSoutheast Michigan showed some changes in median PPO plan design in 2016. It has been nearly five years since median plan design amounts have changed. The key plan provisions for 2015 and 2016 are shown in the table at the top of page 7.

The MMA-MI survey shows average deductibles continue to increase; the average 2016 single deductible is $954.

The maximum out-of-pocket limit continues to increase though not all employers are pushing out-of-pocket maximums to the statutory limit.

Nationally, the median PPO plan for 2015 changed slightly as follows:

• The median individual de-ductible remained at $500 but the average continues to increase to $833.

• The median emergency room copay increased to $150

• The single out-of-pocket maximum is slightly lower at $3,000

The median HMO plan in south-east Michigan showed significant plan design changes in 2016. The following highlights 2016 key plan provisions for local HMO plans:

• 78 percent of HMO plans include an overall plan deductible.

• The plan deductibles dou-bled to $1,000 single and $2,000 family. The increase was large because most HMOs are fully insured and carriers limit the plan designs offered.

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SE MI 2015 2016Single Deductible $500 $600

In-Network Coinsurance 80% 80%

Single Out-of-Pocket Max (includes deductibles, coinsurance and copayments) $5,100 $6,350

Office Care Copay $25 $25

Urgent Care Copay $30 $35

Emergency Room Copay $150 $150

Rx Copays$10 generic/$40 preferred brand/$70 non-preferred

brand

$10 generic/$40 preferred brand/$75 non-preferred

brand

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• Plans that include coin-surance dropped from 88 percent to 67 percent. This may be due to the substan-tial deductible increase and employers’ concerns about employees being able to afford care.

• Only 14 percent of HMO plans include an inpatient deductible or copay. The amount dropped to $150, likely because of affordabili-ty concerns.

• Urgent care copays increased to $40.

• Emergency room copays increased to $150.

• Plans offering split copays for primary care and specialty office visits increased to 59 percent. Copays were $25 for a primary care visit and $40 for a specialist visit.

This is an unprecedented amount of plan design change in one year. In southeast Michigan, HMO plans tend to cost the least. The significant amount of change in median HMO plan design may be because of the ACA. Many employers want to offer one plan that offers a 60 percent value and passes affordability on the federal poverty level (FPL). In organiza-tions with lower paid employees with flexible work hours, it saved

employers’ effort if they could offer a 60 percent plan that met the FPL affordability safe harbor. Based on the amount of change in one year, many employers likely made plan changes to their HMOs to offer a contribution that passed on the FPL.

The national HMO market differs significantly from the local HMO market. Nationally HMOs are the highest cost plan offering. In addition, the national market has lagged in adding additional cost-sharing features to HMO plans, like deductibles and coin-surance. The following summariz-es HMO plan parameters from the 2015 national survey data:

• Only 32 percent of national plans had an overall deduct-ible. The median deduct-ibles were $500 single, $1,000 family.

• Fifty-four percent of plans have split copays. The median primary care office visit was $20. The median specialist copay was $35.

• Only 33 percent of plans included coinsurance. The median coinsurance level was 20 percent.

• Fifty four percent of plans included an inpatient deductible or copay. The median amount was $250.

• Emergency room copay was only $100.

HMOs have moved significantly beyond their initial purpose. Just a decade ago, most HMO plans required a physician gatekeeper and included 100 percent cover-age with a number of copays. The benefits traditionally were far bet-ter than those offered by a PPO plan. Now, nationally, the HMO median plan design and PPO median plan design are similar. Locally with benefit reductions this year, HMO plan designs tend to be worse than PPO median plan designs and slightly better than the median CDHP plan design.

CONTRIBUTION STRATEGIESThe chart at the top of page 8 shows monthly employee con-tributions in southeast Michigan for 2016 as a dollar amount and percentage of the premium.

Dollar amount increases were fairly low. HMO contributions actu-ally decreased from 2015 prob-ably because of the tremendous amount of change in the median plan design in 2016. Single cov-erage contributions are close to national contribution benchmarks

SE MIPPO HMO CDHP

$ Amount % of Premium $ Amount % of Premium $ Amount $ of Premium

2016 Single $136 26% $96 22% $81 20%

2015 Single $129 26% $101 23% $79 18%

2016 Family $448 29% $332 28% $280 23%

2015 Family $414 28% $349 30% $260 20%

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for all plans, except HMOs. Single HMO contributions nationally are approximately $30 a month more than locally. Family contributions nationally are much higher than locally. Historically, local employ-ers have always funded family coverage at a higher rate than national employ-ers.

Since the affordability test is based on household income, employ-ers could use income-based contributions to pass the affordability test. Some employ-ers have considered moving to an income-based contribution to pass the affordability test more easily. Locally, only 6 percent of employers base contributions on an employee’s income. Na-tionally, however, income-based contributions are more popular. Twelve percent of large employers base contributions on income. Income-based contributions can be difficult to implement. They increase the number of possible contributions you need to track in your HRIS system depending on the number of salary bands you use and plan options you offer. They also can be difficult for employees. If an employee gets a raise, the employee might jump a salary band and see an increase in employee contributions. The result of the raise may be a lower take home pay.

PRESCRIPTION DRUGSThe prescription drug market continues to warrant employer concern. According to the 2015 Drug Trend Report published by ExpressScripts, specialty medica-

tions accounted for 37 percent of drug spend in 2015. They expect by 2018, specialty medications will account for 50 percent of drug spend. These medications represent a large amount of drug spend and relatively small amount of usage. Increased usage can

significantly impact your budget.

Specialty medications will continue to be an issue. Most medications in the pipeline are consid-ered specialty

medications and are likely to carry heavy price tags. They are often injectable and require special administration or handling. These drugs treat complex or life-threat-ening conditions. In many cases, they are biologics that work in limited circumstances for certain patients. They can profoundly affect the quality of life for patients with serious health conditions. Some approaches employers can take to controlling pharmacy cost target these specialty medica-tions.

One way employers can lower costs is to structure copays to encourage low cost utilization. Nationally, 57 percent of plans (and locally, 68 percent of PPO plans) have a three-tier prescrip-tion drug copay. More and more employers are now adding copay tiers. Nationally, 22 percent of drug plans have a fourth or fifth tier. Locally, 30 percent of PPO prescription plans have a separate fourth or fifth tier. If there are five tiers, the employer has a list of preferred specialty medications available in the fourth tier. The fifth tier is reserved for non-pre-ferred specialty medications.

Nationally, copays have not changed significantly over the last three years. National median prescription drug plan copays are $10 for generics, $30 for formulary brands and $50 for non-formu-lary brands. Local 2016 median prescription drug plan copays are slightly higher at $10 for generics, $40 for formulary brands and $75 for non-formulary brands.

Another approach to controlling costs of specialty medications is to stop covering them. This is a very aggressive approach. Only 7 percent of local employers took this route in 2016. Employers need to consider this decision carefully since specialty medica-tions affect the quality of life for people fighting serious medical conditions.

Medical management programs can also ensure the plan pays for high cost medications only when they are necessary. In some programs, a physician must authorize the use of a specific medication. Others involve step therapy. These programs require patients to first try less costly medications. Locally 58 percent of employers use step therapy and prior authorization. National-ly 55 percent of employers used these approaches in 2015.

Mandatory generics also help control cost. A plan with mandatory generics will only cover generic medications when they are available. Fifty three percent of local employers cur-rently have mandatory generic requirements. These require-ments are less popular nationally with only 32 percent of large employers using them in 2015.

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Another provision limits liability for specialty medications. It limits first fills of these medications to 14 days. Many of these medications have harsh side effects that pa-tients cannot tolerate. If the first fill is allowed for 30 days or even more, the potential waste if a patient can’t tolerate the medi-cation can be significant.

Employers that self-fund their health plans need to keep a close eye on drug costs. As pharma-cy costs are becoming a bigger percentage of expense, employ-ers should consider adding them under stop loss protection. In 2016, 75 percent of local employ-ers covered prescription drugs under their stop loss policy. In 2015, 76 percent of national em-ployers covered prescriptions drugs under their stop loss.

Employers have aggressively adopted medical management programs and incentives to drive down their prescription drug costs. This diligence has been effective. In fact, employers are now using medical management programs instead of continually raising copays. As a result, prescription drug copays, both locally and nationally, have changed very little in the last five years.

ELIGIBILITY STRATEGIESEmployers use a variety of eligibil-ity strategies to keep health plan costs in check. Locally, employ-ers have two ways to discourage employees from enrolling their spouses: force-outs and surcharg-es. In 2016, 18 percent of survey

respondents adopted a spousal force-out. Under this provision, if spouses have coverage available through their own employers, they are not eligible for coverage under your health plan. Spousal force-outs are not popular with employ-ees, because they can force the family to deal with different plans, deductibles and out-of-pocket maximums.

Nineteen percent of local employ-ers use a surcharge. With this strategy, employees pay an extra premium to cover their spouses on your plan, if their spouses could have obtained coverage through their own employers. The

median monthly surcharge in 2016 is $100.

These strate-gies are not as popular nation-ally. In 2015, only 8 percent of large em-ployers had a

spousal force-out and 12 percent applied a spousal surcharge. The median monthly surcharge is $100. Nationally, large employers tend to charge more for family coverage overall, rather than limiting spousal coverage.

The “play or pay” rules require employers to cover full-time employees and their dependent children or potentially pay a pen-alty. Employers are not, however, required to cover spouses as part of the “play or pay” rules. As a result, some employers are using a third, very aggressive option. They are not covering spouses at all. (Kroger adopted this aggres-sive stance at the beginning of 2014.) Spouses may purchase coverage through the Health

Insurance Marketplace and may be eligible for premium subsidies depending on household income.

No survey respondents in South-east Michigan eliminated spouse coverage.

Employers should continue to manage eligibility carefully to keep their health plan costs in check.

CONCLUDING THOUGHTSThe MMA-MI 2016 Southeast Michigan Mid-Market Group Benefits Survey showed health plan costs increasing at only 4 percent after plan changes in 2016. Nationally, health plan cost increased 3.8 percent after plan changes in 2015.

CDHPs and wellness programs have been leading cost-control strategies for the last few years. Employers across the country are controlling or even reducing costs using the following methods:

• Smoker surcharges• Spousal surcharges• Incentives to complete HRA

and biometric screenings. Providing incentives for using health coaches

• Offering a CDHP and provide incentives so employees will elect coverage

• Offering telemedicine• Offering patient advocate

program• Educating low income

employees about Medicaid

Continued on Page 11

Copyright Marsh & McLennan Agency LLC company. This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

Marsh & McLennan Agency LLC

3331 West Big Beaver Road, Suite 200Troy, MI 48084

Telephone: 248-822-8000 Fax: 248-822-4131www.mma-mi.com

250 Monroe Ave. NW, Suite 400Grand Rapids, MI 49503

Telephone: 616-717-5647 Fax: 248-822-1278www.mma-mi.com

Volume Nineteen, Issue Six July 2016, Page 11

It takes a lot of work to control, rather than merely shift, costs. Many employers are concerned they can’t continue to shift cost without making care unaffordable for employees.

The good news is health plan vendors are also considering options, such as new payment models, to con-trol cost. In the coming years, carriers should be able to base reimbursements on quality, outcomes and effectiveness. Vendors may also turn to reference-based pricing in Southeastern Michigan. This approach caps fees for certain services based on quality and cost prevalence in a given re-gion. Some providers will accept this price. If a member selects a provider that will not accept the reference-based price, the member pays the difference. It also appears that narrow network health plan options will be intro-duced. Another option will be

centers of excellence for certain types of care. These new strat-egies may help employers meet their budgets without shifting cost to employees.

Employers can also structure plan copayments so that members

will choose cost-effective treatments. Employers are already doing this for pre-scription drug coverage. It may be time to apply this principle to other types of

services. For example, an employer may offer telemedicine with either a low or no copay at all. Telephone consultations are less expensive than office visits, urgent care or emergency rooms. Often people turn to urgent care or even the emergency room when they can’t immediately see their physician. A telephone call is a quicker, less costly option. Employers may also consider adding retail clinics to their network of providers. These

clinics are less expensive than urgent care or emergency room services. Some employers are structuring plans to steer mem-bers to outpatient facilities, stand-alone imaging centers and other less costly treatment alternatives. Employees may be inclined to choose less these costly options rather than pay for more expen-sive venues.

If you have any questions about health plan trends, please contact your MMA-MI Account Director. MMA