Have you ever wondered if your company offers the right mix of medical plans? You know your deductible, copays, and coinsurance, but what percent of claims are paid under the plan? Does your company’s medical plan provide meaningful choice for employees or are they electing coverage based on payroll deductions and copays? We can help answer all of these questions by evaluating your plan design(s).
Under ACA, plans are assigned a metal level, defined as follows:
- Platinum Plan value at, or above, 90%
- Gold Plan: values between 80% and 90%
- Silver Plan: 70% and 80%
- Bronze Plan: 60% and 70%
ACA requires that employers, with 50 or more employees, offer coverage providing a plan value of 60% or higher or penalties may be incurred. A plan value and represents the percent of claims paid by the plan. For employers who are self-funded, this represents the percentage of claims you pay on behalf of your employees. Said another way, a plan with an 83% value pays, on average, $8,300 of every $10,000 in claims. Member(s) are responsible for the balance through deductibles, copays, and coinsurance.
While some employers may name, or align, their plans with the metal levels, most do not. However, it’s a tangible way to think about plans, their values, and how to position options so employees can effectively make choices that meet their coverage needs and employers can meet their program objectives.
First, you may want to know what “the rest of the world” is doing. Each year, you may think about tweaking specific plan provisions – e.g., office visit copays, ER copays, increasing the deductible, coinsurance, or maximum out-of-pocket limit. We understand you recruit from other employers who may have a $20 office visit copay and the need for employees to feel they aren’t going to pay more at the doctor’s office; however, benchmarking specific provisions is only part of the process. Annual tinkering without overall context can lead to plans which are too close to one another and may have misaligned budget rates and/or employee contributions.
The 2016 Health Care Cost Institute Survey, released in January 2018, provides some insights. On average, employer plans pay 84.3% of claims meaning, inversely, members are paying 15.7% (not including payroll deductions). This is easy enough to understand as it relates to coinsurance – 20% means the member pays 20% and plan pays 80%. But in a plan with a deductible, some (or all) services first require the member to pay 100% of costs; conversely, once a member reaches the maximum out-of-pocket, the plan pays 100%. And, what percentage does a $150 emergency room copay represent, etc.?
Understanding your plan values allows for a strategic discussion relative to positioning. Traditionally, employers set the lowest contributions for the “least rich” or lowest value plan. Are you inadvertently driving your employees into a plan that pays 85% of claims instead of 80%? If you offer two plans – one with a value of 87%, the other at 83%, and contributions for the “richer” plan are 30% higher; will your employees understand they are spending more for an additional 4.8% benefit? And, don’t forget – employer funding to an HSA/HRA adds value to your plan!
We recommend a 10-point spread between plans (e.g., 85% and 75%) to provide meaningful choice to employees. Knowing your plan values may also provide an additional data point to promote the plans you offer. One last thought, remember to re-evaluate the values each year - as trend escalates, plan values without interference will also climb.
Data-driven decisions help your strategies fall into place.
