Thursday, November 15, 2012

Fwd: qotd: Why employers' health benefit cost growth of 4.1% is a fraud

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-------- Original Message --------
Subject: qotd: Why employers' health benefit cost growth of 4.1% is a fraud
Date: Thu, 15 Nov 2012 11:31:57 -0800
From: Don McCanne <>
To: Quote-of-the-Day <>

November 14, 2012
Employers Held Health Benefit Cost Growth to 4.1% in 2012, the Smallest
Increase in 15 Years

Decisive action by employers in 2012 – in particular, moving more
employees into low-cost consumer-directed health plans and beefing up
health management programs – was rewarded with the lowest average annual
cost increase since 1997. According to the National Survey of
Employer-Sponsored Health Plans, conducted annually by Mercer and
released today, growth in the average total health benefit cost per
employee slowed from 6.1% last year to just 4.1% in 2012. Cost averaged
$10,558 per employee in 2012.

With a growing number of employers now positioning a high-deductible,
account-based consumer-directed health plan as their primary plan – or
even their only plan – employee enrollment jumped from 13% to 16% of all
covered employees in 2012. Many employers see these plans as central to
their response to health care reform provisions that will raise
enrollment. Over the past two years, offerings of CDHPs have risen from
17% to 22% of all employers, and from 23% to 36% of employers with 500
or more employees. Well over half (59%) of very large organizations
(20,000 or more employees), which typically offer employees a choice of
medical plans, now offer a CDHP.

Moving even a small number of employees out of a more expensive plan
into a CDHP can result in significant savings for an employer. The cost
of coverage in a CDHP with a health savings account is about 20% lower,
on average, than the cost of PPO coverage – $7,833 per employee compared
to $10,007.

"PPACA requires that health plans cover, at a minimum, 60% of eligible
health plan expenses," says Ms. Cunninghis (Sharon Cunninghis, US
business leader for health and benefits). "Some employers are resetting
their health plan value to move closer to that minimum, and saving money
as a result."
Offering a lower-cost CDHP is one way employers "reset" plan value in
2012. Others simply raised the deductible of an existing PPO plan. The
average PPO in-network deductible reached $1,427 for an individual in 2012.

"Over the past decade, employers have figured out how to stabilize
health benefit cost increases through cost-shifting and other cost
management techniques. Now we're seeing a move toward even greater
control through defined contribution strategies," says Ms. Cunninghis.
An example of a defined contribution strategy is determining in advance
what the employer contribution to the cost of coverage will be, and
requiring employees to pay anything above that amount. If the employer
offers a range of plans, employees can save money by choosing a
lower-cost plan. Nearly half of employers – 45% – say they currently use
or are considering using a defined contribution strategy.

Comment: Pop the champagne corks! Businesses have held the rate of
health benefit cost increases to only 4.1%! Though that is still twice
the rate of inflation, it's the smallest increase in 15 years!

How did they achieve this success? By moving employees into lower cost
consumer-directed health plans. By increasing deductibles for the plans.
By other forms of cost shifting. By lowering actuarial values of plans
to 60% - the minimum required by the Affordable Care Act. By adopting
defined contribution strategies. By shifting to private insurance
exchanges. By herding employees into narrower provider networks.

So have the employers finally learned how to slow the escalation of
health care costs? No! They have dumped their costs onto the backs of
their employees!

So while they enjoy the bubbly in their executive suites, they have left
too many of their employees without even any beer money.

If you didn't read yesterday's message that included the work of Thomas
Piketty and Emmanuel Saez, you should. You will see that the solution is
quite simple. Tax the crap out of the plutocrats and spend the proceeds
on a public insurance program for all of us - an Improved Medicare for
All. (I would use less inflammatory language except that wealthy
employers who have such a low regard for their own employees do not
deserve elegant language.)

Please note that this message does not apply to the multitude of small
businesses which are struggling to maintain a modicum of success. These
businesses are also victims of the burdensome health insurance costs.
They too would benefit from an equitable public insurance program, if
only they would make an effort to understand what it would mean for
them. It's our job to try to educate them.

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