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Mercer

This candidate looks awesome: great experience, glowing references. But you noticed her hesitancy when you mentioned your company’s health benefits—the “one-size-fits-all” plan.

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A recent report from the Health Care Cost Institute (HCCI) found that people enrolled in high-deductible consumer-directed health plans have higher out-of-pocket healthcare expenditures than those in other types of medical plans, even though they use fewer medical services. The HCCI study examined claims from 2010-2014 for over 40 million individuals per year covered by employer-sponsored insurance. According to the study, out-of-pocket expenditures for people enrolled in CDHPs were 1.5 times greater than for those in traditional PPOs or HMOs, even though CDHP enrollees utilized roughly 10% fewer medical services per year. Neither the study groups nor the results were adjusted for member demographics, so it’s difficult to say that plan design accounted for all the difference in utilization. But it is interesting to note that while utilization was lower in all categories of medical services, the biggest differences were in the use of brand-name drugs and in ER use – two areas where overutilization is targeted by consumerism strategies.

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Employers are grappling with the escalating cost of healthcare benefits. HR and finance leaders are adapting -- as are employees across the nation -- to a ‘new normal’ of narrow networks and high deductible plans. Basic coverage is increasingly augmented by voluntary benefits to meet the varied needs of employees and their families. During this ongoing transition, employees are being asked to more actively participate in the enrollment process.

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Every time a big company makes the leap to a private exchange, the industry pays close attention – especially Mercer’s own Sharon Cunninghis, North American Health & Benefits Leader. In this Human Resource Executive article, Sharon shares her thoughts on private exchange trends and opportunities, including best practices for employers who are making the switch. Her advice: “Help people understand the new benefits program, how it differs from what was in place previously, the added advantages of the new program and available support services,” she says. “Secondly, make sure that there’s a good, solid project plan from an implementation perspective – technology, new administrative processes and tools.” Sharon goes on to explain why, ultimately, health and benefits solutions of the future, Mercer Marketplace 365 in particular, will be seen as a “true healthcare destination” – a comprehensive platform that goes above and beyond today’s typical private exchange, serving as a resource not just at open enrollment, but throughout the year. With 6% of large employers either already using a private exchange or planning on it for 2017 – and an additional 27% considering adoption within 5 years – this is a trend to watch.

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This New York Times article offers an interesting “compare and contrast” analysis of public exchange plans versus employer-sponsored plans. Whether you’re satisfied with benefits on the public exchange really comes down to your perspective. If you were among the millions who were previously uninsured, you’re likely to be happy with your exchange coverage. If you came to the exchange after having had employer-sponsored coverage, the story is very different. A more limited choice of providers in the health plan network and higher out-of-pocket requirements are among the chief differences noticed by those coming off employer plans. In the end, a typical plan on the public exchange “looks more like Medicaid, only with a high deductible.” So while the public exchange is helping to fill a gap in the U.S. health care system, it’s not proving to be a source of comparable coverage for early retirees or those who would like to quit a corporate job to freelance or start a business. And each year, as these plans get skinnier, we’re seeing fewer employers that would even consider dropping the company plan to send employees to the public exchange.

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Way up there on the list of things not to like about the U.S. healthcare system is the extreme variation in prices charged for the same service from one provider to the next – variation that is very often unrelated to quality of care. While employers are tackling this problem in a few different ways, there isn’t a ton of data to show how well any of these strategies work. So I jumped on the recent New York Times article reporting on one mega-employer’s attempt to achieve more standard pricing while still allowing members to choose their providers – reference-based pricing. The employer in question is the California Public Employee Retirement System, or Calpers for short, and the experiment included 450,000 of its members.

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We got a question in response to our post Checklist: Want to Increase Your CDHP Enrollment? Try This.

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DOL overtime rules are not just a compensation issue. Check out this slide show with advice on how to approach compliance with the new rules, compliments of Employee Benefit News and our Mercer colleagues. But when evaluating changes in your compensation strategy, don’t forget to consider the benefits implications as well. Be sure to quantify the impact of the new salary threshold ($47,476/year) on benefit costs – for defined benefit plans, 401k match, life insurance, LTD, etc. Compliance with these new DOL rules could be an opportunity to reconsider affordable contributions under the ACA, since increases to salary base may allow for higher employee contributions for employers using rate-of-pay or W-2 safe harbors. Separately, evaluate whether reclassified employees will be subject to a different tracking method under the ACA 30-hour rule – it can get complicated! From a documentation perspective, check eligibility definitions for benefits to be sure they are consistent across plans and align with your compensation strategy. 

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A Federal Appeals Court ruled that consumers may purchase a fixed indemnity product even if they have not purchased comprehensive medical coverage that meets the ACA criteria for minimum essential coverage. It is estimated that four million Americans have purchased this type of plan and do not also have comprehensive medical coverage, bringing a “gap” in Obamacare into the spotlight. In the gap are those living in states that did not expand Medicaid whose household income is too high to qualify for Medicaid and too low to qualify for a subsidy on the public exchange. While we all agree that a plan providing a cash benefit – for example, $500 a day for hospitalization – is not a comprehensive medical benefit, these plans do play an important role in the era of high-deductible health plans. In Mercer Marketplace 365, 34% of people enrolled in a plan with a deductible of $1,500 or higher are enrolled in at least one supplemental health plan. While there are different types of products – some focused on an illness (e.g., cancer), or on a type of coverage (hospitalization), or on a circumstance (accident), these supplemental benefits do not affect HSA eligibility and provide a financial security blanket for those concerned about high deductibles. If you do not currently offer supplemental benefits alongside your high deductible health plan, it’s not too late to think about it for 2017. 

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Benefit teams have had a lot to cope with lately – ACA reporting, the new ADA/GINA wellness rules, and the Cadillac tax, to name just a few of the high-priority issues on their plates.  So it’s not surprising that when we ask clients about their absence, disability, life solutions (ADLS), they tell us they haven’t had time to review them over the past few years.  And many don’t see much to be gained from a review, since they don’t believe they would be able to negotiate a better rate.

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