Tag Archives: health & group benefits

Employer-sponsored coverage: “Expanded” voluntary benefit offering

Voluntary benefits are products offered through an employer but paid for partially or solely by employees through payroll deductions. The attraction of these benefits is that they can offer group rates to employees that they would likely be unable to obtain on their own. Voluntary benefits can also help fill coverage holes when an employer cuts back on or eliminates a specific benefit program. Voluntary benefits are a good way for employers to enhance their employee benefit offerings at little or no cost.

Voluntary benefits have historically encompassed a few basic policies. Today, however, many employers are expanding their offerings to consider their employee demographics (age, marital status, family members), lifestyle, and financial habits. Decisions regarding which benefits should be offered should be made with care. Voluntary benefits should provide clear and convenient options that are easily accessible by employees when needed.

Milliman recently conducted an employer-based survey focused specifically on the menu of “expanded” voluntary benefits. Across a range of voluntary benefits, employers indicated which benefits they were currently offering in 2017 as well as those benefits they planned to offer in 2018.

Voluntary benefits already offered in 2017
As shown in the table in Figure 1, accident insurance options, standing desks, and critical illness insurance options were the top three offered voluntary benefits in 2017. Others also leading the pack included paid leave for new parents and to care for dependents, telemedicine, financial education/counseling, and wearable fitness devices.

Voluntary benefits planned to offer in 2018
The table in Figure 2 shows that the top three voluntary benefits where employers planned to expand in 2018 were financial education/counseling, student loan repayment program, and pet insurance. Other options of interest included paid leave for new parents and to care for dependents, telemedicine, standing desks, and identification of insurance options.

Health insurance (i.e., medical, Rx, dental) still makes up the main health and welfare offering. However, an ever-expanding range of voluntary benefits gives employers more flexibility and employees more options. As a general rule, the selection of a voluntary benefits programs must be strategic. These benefits must be chosen, managed, and communicated with care, keeping in mind the employer’s overall financial goals as well as its employee population needs. There are many voluntary options available but an employer should only choose those that will provide the most relevance and appreciation to its employees.

This article first appeared in the March 2018 issue of Health and Group Benefits News and Developments.

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Paid family leave gaining traction in the United States

Beginning January 1, 2018, New York joined three other states to offer paid family leave in the United States. California, New Jersey, Rhode Island, and now New York all offer paid family leave programs funded through employee contributions. Washington state will begin offering paid family leave in 2020, funded through a combination of employer and employee contributions. Washington, D.C., will begin offering paid family leave in 2020 through employer contributions.

As more states implement paid family leave programs and the federal government continues to discuss it, paid family leave benefits as part of health and welfare programs have gained traction. Almost 60% of U.S. employers offer or are planning to offer paid leave in 2018 for new parents, and just under 50% offer or are planning to offer paid leave in 2018 to care for a sick family member.

Details of paid family leave programs vary from state to state. Employers with employees in multiple states need to navigate these different requirements in designing their programs. A summary of paid family leave requirements by state is shown in Figure 1.

In addition to the difference in benefits summarized above, details such as eligibility, waiting periods, and qualifying events, as well as how the benefits are delivered, differ from state to state. Most states provide the benefits through a state fund, although some allow for private insurers to participate in paid family leave, such as New York and New Jersey. New York also allows employers to self-insure their benefits.

As governments and employers (where self-insuring is an option) consider the cost of paid family leave programs, it is important for them to consider the following:

  • There is limited data available with regard to utilization of paid family leave benefits.
    • Although there is experience with respect to other paid family leave programs offered in states such as New Jersey it is important to adjust for differences in design and demographics of individual groups.
    • It is also important to consider disability claims related to maternity, as bonding with a newborn is generally where a majority of employees utilize paid family leave benefits. In New Jersey, approximately 85% of claims are for bonding with newborn children.
  • There will be administrative costs associated with the program.
  • Employers who self-insure in New York are required to hold a minimum security deposit to fund unexpected losses, which is determined at the employer level using assumptions prescribed by the New York Department of Financial Services (DFS). Also, the employers are required to submit their experience with DFS on an annual basis.

Some states and employers have taken the lead in implementing paid family leave programs in 2018. As others consider implementing paid family leave it is not only important to consider the cost of the program, but also the design, delivery, and funding. All of them are important to an employer’s leave management strategy.

This article first appeared in the March 2018 issue of Health and Group Benefits News and Developments.

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Plan sponsors must consider several strategies to manage pharmacy costs

In recent years, pharmacy costs have been a hot topic. Plan sponsors must remain vigilant and stay current on industry strategies used to manage pharmacy costs. In this article, Milliman consultant Ajanthan Balasinkam outlines a number of important considerations for plan sponsors, including plan design, contracts, the opioid crisis, and the specialty pipeline.

Considerations for adding applied behavioral analysis coverage

Milliman assisted an employer-sponsored plan in a large Midwest mandate state to help it understand the risks and costs of adding applied behavioral analysis (ABA) coverage.

ABA for autism spectrum disorders is one of the fastest growing state benefit mandates. Today, 46 states mandate some form of autism coverage with varying degrees of benefit coverage and limits. The general goal of ABA is to improve socially significant behaviors to a meaningful degree.

While self-funded employer-sponsored plans are not required to comply with state mandates under federal law (ERISA), they are not immune from the trend toward greater ABA coverage in the states. With this come many challenges for plan sponsors.

In this case study by Adam Miller, learn how Milliman helped a plan determine the risks and costs of adding ABA average.

Cost control measures for growing employer medical and pharmacy exposure

Rising prescription drug costs are old news. What is new, however, is just how high they have gone. Take the recent case of a member whose annual pharmacy spend is expected to exceed $7 million per year. That is the annual spend for one member. It turns out the medication is for a life-threatening, chronic, hereditary condition, and the medication will be needed for the remainder of the member’s life. This means no end in sight for the employer-sponsored insurance plan.

In the first year, the stop-loss coverage will cover the majority of this cost; however, there is the potential for a 40% to 60% increase in stop-loss premiums the following year, and even so, this member will be lasered out of any coverage in following years. In other words, the employer-sponsored health plan will be liable for this full amount going forward, plus any additional costs for this individual for medical or other pharmacy expenses (e.g., emergency room visits, hospitalizations, etc.).

Can employer-sponsored plans afford to absorb that kind of additional, annual spend in their healthcare budgets? In this particular case, the drug keeps the member alive, so not covering the medication is not an option, morally or ethically. But if this cost potentially bankrupts the plan, there will be no coverage for this member anyway.

So what can employers do to protect against this claim and others?

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Employers cope with rising healthcare costs

In May 2017, Milliman released its 2017 Milliman Medical Index (MMI), which measures the cost of healthcare for a typical American family of four receiving coverage from an employer-sponsored preferred provider organization (PPO) plan. The MMI increased $1,118 (4.3%) to $26,944, including a 3.6% increase in average medical expenditures and an 8.0% increase in prescription drug expenditures. This increase of more than $1,100 (a continuation of similar annual increases in the index since 2001) shows that federal healthcare reform efforts, which have mainly targeted the individual insurance market and Medicaid, have had little effect on reducing employers’ costs. Although this year’s MMI saw the lowest annual percentage increase in healthcare costs for a family of four with employer coverage since at least 2001, healthcare cost increases continue to outpace consumer price index (CPI) inflation trends, as shown in the chart below.

Employers have responded by:

Gradually transferring more of the cost to employees through contributions and plan design
Over the past five years, the MMI has increased 30%, while the employers’ share of healthcare costs has increased 25.7%. As a result employees are paying about 43% of the MMI, up from 41% in 2012.

Putting more pressure on vendors
For example, employers sponsoring self-insured prescription drug plans should be regularly reviewing pharmacy benefits manager (PBM) arrangements through requests for proposals (RFPs) and market checks.

Managing utilization of benefits and cost shifting by providers through strategies such as narrow networks and proactive medical management

Staying ahead of the prescription drug pipeline
Over the past few years, prescription drug trends have been greatly influenced by the entry of extremely expensive, curative hepatitis C treatments. While it looks like these treatments are no longer driving prescription drug trends, it is important to monitor the status of the prescription drug pipeline to understand what employers can expect to spend on prescription drugs in the coming years. Employers can stay ahead of the curve through strategies like utilization management, including prior authorization, step therapy, and pursuing specialty pharmacy rebates.

This article first appeared in the January 2018 issue of Health and Group Benefits News and Developments.

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