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Arkansas employers and workers have been slow to join the rush for high-deductible health plans, but they have seriously made up for lost time, switching to health savings account plans more quickly than any other state since 2015.
“This is definitely one of the insurance trends these days,” said Greg Hatcher, CEO of The Hatcher Agency in Little Rock. “Ten years ago maybe 20% of people had a high deductible plan in Arkansas, and now it’s over 50% compared to PPOs. [preferred provider organizations]which has been the basic plan for most employers.”
Nationally, nearly 55% of private sector workers now have high-deductible health plans compared to 39.4% in 2015. Arkansans have led the shift, going from 33% in HDHPs in 2015 to 56.9% in 2020, According to figures from KFF, formerly the Kaiser Family Foundation. That 71.7% increase was the sharpest among all states, according to an analysis by ValuePenguin.
Health insurance premiums, property insurance and liability coverage are all under pressure in a precarious world, several Arkansas insurance professionals said, as the pandemic, rising building prices and home liability provisions take their toll. Arkansas Business.
Higher high-deductible health plans carry clear benefits for businesses. Premiums for employer contributions are always lower, and pre-tax payroll deductions provide employees with attractive income tax breaks. The downside is that some workers may not be able to absorb the upfront cost of the higher deductibles, which are at least $1,400 per year for individuals and $2,800 per year for families.
Employers have to [go with higher-deductible plans] to be able to afford coverage for its employees; Health care costs are on the rise, said Ralph Haymond, president of Haymond Insurance at Searcy, an independent agency. “Your employees take in a larger portion of the costs because the increased tolerance comes from them.”
Greg Hatcher of the Hatcher Agency in Little Rock explained cost dynamics and how the Affordable Care Act changed the equation. When health savings plan policies came out, employers had to either choose or choose between offering their plans or PPO plans. “You can’t offer both, and prices are starting to go up,” Hatcher said.
“Health care reform was a really good thing, but when Obamacare arrived, it was wiped out [exclusions for] All pre-existing conditions and 100% health coverage added.”
“That made the plans richer, but it also meant more claims, and there is a requirement that the employer charge no more than 9.6% of an employee’s income for health coverage. As claims went up, so did the premiums.”
Discounts are also increasing in property insurance and fleet liability coverage for cars and trucks, said Andrew Meadows, CEO of Haymond & Sunstar Insurance of Arkansas, driven by rising property values and a flood of severe weather claims, including hurricanes and floods.
“One hurricane in Florida caused total damage of about $60 billion or so, and most recently Hurricane Nicole was the first November hurricane to hit Florida since 1935,” Meadors said. “This is very worrying.” People who own property anywhere near the coast in Florida, Alabama and Mississippi, he said, “are either going to have to be wealthy or be big risk-takers, because wind and hail discounts are through the roof.”
High health of the opponent Plan coverage, nationwide
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Source: ValuePenguin by LendingTree and Kaiser Family Foundation
Meadors said some residents are having to self-insure properties with a $100,000 deductible. “Reinsurance markets re-price. Those are the insurers that we all deal with. So the reinsurance market actually drives up costs from the agent brokers that you deal with in general. That’s what drives up premiums.”
It’s not just a coastal phenomenon, Meadors said. “In Hot Springs on Lake Hamilton, we secure a nice condominium complex and have only eight different carriers turn it flat,” he said. “They wouldn’t even quote the renovation because it has such high habitat values on the water.”
Insurance experts said the companies are also working to renew coverage to account for rising property values. “On the property front, if a business bought a building eight years ago for $5 million, that building is now worth $8 million or $10 million, so you could see the premiums could be double,” Haymond said.
In response, many companies are accepting higher discounts for wind and hail damage. “Instead of deducting a principal of $5,000 or $2,500, the companies take 1% and 2% of the value of the property.” CEOs understand the risks; After all, at 2% of a $10 million building, deductible costs can be up to $200,000 from a single hailstorm.
Meadors said some companies, facing the possibility of a discount of up to 3%, have found a solution. “There are now emerging programs called wind-hail buydown programs where, for a reasonable premium, a customer can say, you know, this $100,000 is too risky for me, and I want to pay another $8,000 to $10,000 to reduce Cut to $25,000. That’s something more palatable.”
High court rulings in liability lawsuits have also led to higher premiums, said Haymond, who also has offices in Springdale and Marianna. “We write trucking insurance in five different states, and auto liability has been a huge concern for all of the companies. You see auto liability rates going up because of the very large judgments now coming out of the courts. As all of these claims are out there, weather and everything, companies are finding Difficulty maintaining its earnings. And, of course, you have to be profitable to stay in business.”
The Covid pandemic has shaken up the life insurance markets, Meadors said.
“Life expectancy in America has fallen by two years, and you see that in deaths every Sunday,” he said. “You’re going to see life insurance premiums go up, and they’re paying a lot more on group life policies in the workplace. It’s because of COVID. That’s right, and it’s happening.”
One positive trend, Meadors said, is that the price of workers’ compensation insurance has fallen slightly thanks to new emerging markets. “They are called single worker carriers, and all they do is write workers compensation coverage,” he said. “So increased competition in a good loss environment in Arkansas leads to lower premiums. So that’s good.”
Hatcher said companies are also suspending new lines of coverage for employees in today’s tight job market. “I’m seeing more voluntary coverages being offered like cancer, accident, volunteer life, and even pet insurance. Because in today’s workforce environment, it’s hard to find people to hire. Sometimes those benefits can tip the scales.”