Brian Freeman is the CEO of Mployer Advisor, one of the nation’s largest marketplaces connecting employers to top-rated insurance advisors.
Benefit design and healthcare planning for 2024 has kicked off for most companies by this point. From my purview in the insurance marketplace, our company sees several thousand employee benefits plans each year across all company sizes and industries. As I’ve looked over the past several years and ahead to 2024, there are several macro changes I believe business leaders should be aware of—some new, some old—as well as swirling micro trends that will likely have a more minor impact in 2024 but continue to grow larger over the next 36 months.
Macro Trends
Employers continue to grapple with rising insurance premiums. Amid an environment of sustained high inflation, healthcare premiums are seeing a national weighted average increase of 6% coming into 2024. However, this figure belies the stark regional disparities that are emerging. Employers in Northeastern states like New York, Maine, Connecticut and Vermont are experiencing a more burdensome surge in premiums, exceeding 10% year over year. Conversely, some Southeastern states such as Texas and North Carolina are witnessing more modest increases, with rates under 5%.
This regional variance is not merely a random fluctuation; it is influenced by demographic shifts exacerbated by the Covid-19 pandemic. During the pandemic, a noticeable migration pattern emerged, with a younger, more mobile demographic relocating to the Southeast. This migration has had a significant impact on the risk pools that insurance companies use to calculate premiums. The Northeast and West Coast are now left with a higher concentration of older, higher-risk employees, which are higher healthcare utilizers and more costly. On the other hand, the Southeast benefits from a risk pool that is now slightly lower, which is reflected in their comparatively lower premium increases.
Given these changes, HR teams should be prepared to address concerns and/or appreciation from employees as to the changes in healthcare costs. If you are in the Northeast and have employees that are frustrated with the increases, you can share that it’s a broader shift impacting the region and not isolated to your office. Similarly, being in the Southeast offers lower increases year over year, and sharing that is a benefit to the region. This shift poses opportunities and challenges, so I recommend working with your insurance broker to address these shifts and adjust your tactics and strategies when tailoring benefit plans.
Micro Trends
As we step into 2023, there are several emerging micro trends that are poised to quietly shape the healthcare enrollment landscape.
1. Direct Contracting Carve-Outs
The healthcare industry is witnessing a quiet rise in vendors that specialize in direct contracting for specific services, like imaging or outpatient services for minor knee surgeries. Some examples of larger scale direct contracting are the partnership between Boeing and MemorialCare Health System in Southern California (involving nearly 40,000 employees) and Disney contracting directly with Orlando Health for its 70,000 employees in Orlando and Florida. Newer solutions are evolving where third-party entities are direct contracting for lower acuity services and taking those rates directly to employers. These solutions bypass the employer’s TPA and carrier. While this trend is not entirely new, it has reached a level of maturity that I believe employers can no longer afford to ignore—and it appears to be gaining traction.
2. Health Plan Price Transparency Data
The availability and utilization of new pricing data, which shows the contracted rates for each carrier and provider, is currently concentrated among carriers and providers, who use it to negotiate rates. However, some employers and brokers are starting to take advantage of this data themselves when forming their health benefits plans. While the immediate impact may be minimal so far, I recommend keeping an eye on this trend, as utilizing this pricing data has the potential to revolutionize how healthcare plans are selected and negotiated over the coming three to five years.
3. Increased Broker Compensation Transparency
New legislation has mandated that brokers and consultants “disclose any direct or indirect compensation they may receive for referring services to the plan” (their employer client). This requirement, which came into effect for contracts entered into or renewed after December 27, 2021, aims to bring more transparency and fairness into the broker-employer relationship. We are still in the early innings, but I recommend being diligent in understanding how your brokers are compensated and ensuring that their disclosed compensation meets the regulation to ensure alignment of interests.
4. ICHRA and QSERHA Growth
Individual Coverage Health Reimbursement Arrangements (ICHRAs) and Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) have been buzzwords for a while but have yet to make a significant impact. Currently, they account for less than 1% of employer-sponsored healthcare members. However, their year-over-year growth, albeit from a small base, indicates potential for future expansion. Legislative changes could provide the necessary tailwind for these options to become more mainstream.
If you have less than 50 employees, I recommending carefully evaluating if this is the right choice for you. These plans help simplify the medical aspects of benefits plans, but they still need to be enrolled by a broker, and then you also need a separate broker to source disability, life, dental and help plan leave and retirement. It is not an end-to-end solution, but it can simplify medical.
Conclusion
As we move into 2024 planning and ultimately enrollment, the rising healthcare premiums of 2024, influenced by high inflation and demographic shifts, present a complex challenge for employers. I recommend being proactive in understanding these trends as you navigate the complexities of healthcare enrollment in 2023. While some trends are more mature and immediately actionable, others require a longer-term strategic view. Either way, staying informed and agile is key to successfully adapting to the evolving healthcare landscape.
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