Back Button
Menu Button

New Kaiser Survey on Employer Health Coverage Released

National Study on Employer Health CoverageNearly every September for the past two decades, I have released our survey findings from the Iowa Employer Benefits Study and, during that same month, would eagerly await the results from the annual Kaiser Family Foundation Employer Health Benefits Survey. The Kaiser findings put a complementary national perspective to our Iowa results.

Unfortunately, due to the Covid-19 pandemic, I pumped the brakes on surveying Iowa employers for this year. Kaiser, however, did pursue their national survey and it was released a little later than usual – on October 8.  The results provide an important glimpse into what is happening to employer-sponsored health insurance around the U.S.  Overall, Kaiser surveyed 1,765 non-federal public and private organizations with three or more employees, and from this number, 540 employers were located in 12 Midwestern states (an average of 45 employers per state). The Kaiser study, I must mention, does not break out the results by each state, only by region.

Key Findings by Kaiser

The Kaiser survey is very helpful because it documents national health trends for employer-sponsored plans. Some of the key findings in 2020 include the following:

  • About 56 percent of employers offer health benefits, a percentage that remains unchanged over the past five years. Similar to Iowa, the larger the employer, the more likely health benefits are offered. About half (53 percent) of U.S. organizations with fewer than 50 employees offer health coverage, and nearly all (99 percent) of the organizations surveyed by Kaiser with at least 200 employees offer health coverage.
  • The average single and family premiums increased by four percent over the past year, while worker’s wages increased by 3.4 percent and inflation increased by 2.1 percent.
  • The average annual premium for single health coverage is now $7,470, while the average family health premium is at $21,342. Over the last five years, the family premium has increased over 22 percent, and over the last 10 years, it has increased 55 percent.
  • On average, covered workers contribute 17 percent of the total single coverage premium and 27 percent of the premium for family coverage. In our 2019 Iowa study, we found that covered workers contributed 18.6 percent for single coverage while workers for family coverage contributed 30 percent of the premium.
  • The average single deductible found by Kaiser now stands at $1,644, which is remarkably similar to last year’s $1,655 average. In 2020, 83 percent of covered workers have a deductible in their plan, similar to last year.
  • Most large organizations (81 percent) offer at least one type of wellness or health promotion program. However, among those that offer the coverages, only 11 percent) view the programs as “very effective” at reducing the organization’s health care costs.
  • About 83 percent of surveyed employers who offer health benefits say they are satisfied with the overall choice of providers available through their insurance plans, however, only two-thirds (67 percent) say the same about their mental health and substance abuse networks.

The 2020 Kaiser survey was conducted from January to July, with about half of the interviews conducted before the full extent of the pandemic had been felt by surveyed employers.  Kaiser President and CEO Drew Altman acknowledged, “…our survey shows the burden of health costs on workers remain high, though not getting dramatically worse. Things may look different moving forward as employers grapple with the economic and health upheaval sparked by the pandemic.”

Because of this, next year’s survey will provide a more realistic look at how the pandemic may have impacted employer-sponsored health benefits in the U.S.

To learn more about the Kaiser study, the article was published in the peer-reviewed journal Health Affairs.

To stay abreast of employee benefits, we invite you to subscribe to our blog.

Cost-Shifting of Hospital Prices to Private Payers

Many of us are lulled into the rhetoric coming from hospitals and health systems that they must increase their prices for private payers because of inadequate reimbursements from public payers, such as Medicaid and Medicare. To some degree, this may well be the case. After all, hospitals and health systems need to generate enough revenue to offset costs to keep their doors open.

But this argument may not be as iron-clad as we were led to believe. Case in point: A recent report by the RAND Corporation about hospital prices paid by private health plans and how they compare with Medicare payments.

Findings of RAND Corp. Study

This is the third consecutive year that RAND Corp. has analyzed medical claims to determine how much private insurers pay for inpatient and outpatient hospital services. The most recent year of claims data analyzed was from 2018, which is about a two-year data lag.

Due to lack of medical price transparency, the sad commentary is that for private hospital prices to be discovered, hospital claims must be thoroughly analyzed to determine the ‘game of horseshoes’ on the prices being charged and paid by private health insurers and large self-funded employers who voluntarily share their claims data with RAND. In return, RAND then compares these prices to similar medical procedures that are paid to the same health providers by Medicare. With this information, private payers can attempt to negotiate better deals with the provider community.

This most recent report concluded that private insurers paid hospitals on average 247 percent of what Medicare would have paid for the same service in 2018. This gap is up from 230 percent in 2017 and 224 percent in 2016. To put this another way, if private payers from this study had paid hospitals at Medicare rates, they would have paid $19.7 billion less between 2016 to 2018 – a potential savings of 58 percent.

Here’s the Kicker

The RAND study’s lead author, Christopher Whaley, indicated that if hospitals are truly up-charging based on being shorted by Medicare and Medicaid, he would have expected to see hospitals with more Medicare/Medicaid patients charging private payers more, and those with fewer public patients charging less. But he found no correlation. His assessment is that “…sometimes hospitals charge high prices because they have the reputation or the quality or the market dominance to charge high prices…”.

All good reasons on why hospitals desire to keep prices opaque from private payers.

In addition to prices, the RAND Corp. also determined whether higher prices correlated with higher CMS star ratings and better safety scores from The Leapfrog Group. The findings show that high-quality hospitals with low and medium prices do exist, and it’s up to employers to implement tactics like narrow networks or reference pricing to steer employees to these high-value facilities.

Criticism by the American Hospital Association (AHA)

The AHA issued a Fact Sheet in January 2020, indicating that in 2018, Medicare paid hospitals 87 for every dollar that hospitals spent treating Medicare patients. For Medicaid patients, the AHA said that hospitals received 89 cents.

As frequently as the RAND Corp. releases studies on private hospital prices, the AHA equally releases statements refuting these findings.  AHA Executive Vice President Tom Nickels recently stated that the RAND report “again perpetuates erroneous suggestions that Medicare payments should be used as a benchmark for private insurers…”. Nickels also suggests that the claims analyzed represents a “handpicked sample of employers and insurers” that are minuscule compared to the entire hospital claims in the U.S.

Nickels does have a point, yet the AHA does little to nothing to equip private payers with information needed to determine whether or not the money being paid to hospitals are reasonable and demonstrate high value. But why would they? The AHA represents hospitals, desiring to perpetuate their members’ best interest at the expense of private payers who cover nearly 150 million Americans enrolled in employer plans or through individual market insurance.

Quite frankly, insurers are not immune from this problem either. They can avoid gag clauses that require secret prices and arrangements with hospitals and health systems. Employers, at a bare minimum, expect transparent behavior from their insurers and must insist that insurers eliminate backroom ‘deals’ with health providers.

The opaque pricing methods we have historically allowed must be relegated to the past. It’s time to open the doors and turn on the lights to expose the truth. Past pricing practices, convenient for some but detrimental for most, must be replaced with honorable and sensible pricing practices.

This is my take on the latest RAND report.

To stay abreast of employee benefits, we invite you to subscribe to our blog.

My Office in a Treehouse? Pandemic Reflections

Over the years, I have had the luxury of working from home when inclement weather or other circumstances dictated that I do so. Other than making sure that I had my laptop and a reliable internet connection, I was good to go.

This past February, my wife had her knee replaced, requiring us to make necessary changes within the living space at home to ensure a safe and convenient recovery. During this period, I worked remotely without any hiccups. A few days a week, I would stop by the office – just 12 minutes away from home – to pick up the mail and water a few plants.

On March 11, the World Health Organization declared the relatively little-known coronavirus outbreak to be a worldwide pandemic. Two days later, President Trump declared the pandemic a national emergency. Within days, our state and country ground to a halt, profoundly altering our personal and professional lives. ‘Social distancing’ became the new norm. Businesses shut down and our once-busy streets resembled something out of an old western movie, minus the tumbleweeds.

We all painfully know the story since March: Millions of Americans lost their jobs or were furloughed. Those employees fortunate to continue working were relegated to finding new ways to operate out of their homes. For many of us, working remotely continues to this day – and will likely continue into the foreseeable future.

During the last seven months, I have had ample time to reflect on whether or not working in an office – along with its’ associated costs – made economic sense. Much of the work I do revolves around research and analysis – some is outsourced to trusted partners. In short, my work requires a quiet workspace with internet access, a coffee maker and a phone for periodic conversations. Being tethered to a formal office space is optional.

Over time, I have found that phone calls were becoming about as frequent as using the fax (remember that relic?).  Prior to the pandemic, most in-person meetings were conducted over coffee or lunch. It really was that simple.

After weighing the pros and cons, the necessity of having a separate office suite became a very easy decision. Paying office rent and utilities, phone and internet, renter’s insurance and, to a minor extent, fuel to commute to and from the office, was a personal preference – but not a business necessity. All of this can be accomplished from home – or perhaps a slightly advanced treehouse.

In the not too distant past, I may have confused my work-based livelihood with where I worked rather than what I did at work. For me, I have sorted out this seemingly razor-thin difference and have reconciled what is most desirable. I can easily perform this same work in the confines of my home and not skip a beat on my output. The pandemic has proven to be a helpful audition, guiding me to feel more comfortable with this eventual change of converting to a full-time remote workplace.

I recently spoke with a local commercial realtor who told me that office space may become more plentiful because of the pandemic. This glut of office space, however, has not hit the commercial market quite yet, primarily due to the Paycheck Protection Program (PPP) helping offset payroll costs, rent, interest and utilities for small businesses. But with a prolonged pandemic, decisions similar to mine will likely follow. A Des Moines Register article on September 3 approached this topic, using some interesting national statistics.

My office conversion has already begun, and in about eight months when my lease expires, I will be sitting in my home den, lakeside or in other locations – performing the ‘what’ regardless of ‘where.’ I’m very comfortable knowing that making ‘sausage’ in the backroom will be no different from home versus an office suite some 12 minutes away. The treehouse idea, however, may need to wait.

Working remotely will be seamless, while wearing pajamas has yet to be decided!

To stay abreast of employee benefits, we invite you to subscribe to our blog.