Emerging solutions help counter rising costs of health care coverage
It's not a great way to start the New Year-telling your clients that their health insurance premiums are going up another 10% to 20%.
But agents and brokers can soften the blow if they offer some options, says Rick Klein, president of Horton Benefits Solutions, the employee benefits division of The Horton Group, a large commercial lines broker in Orland Park, Illinois.
'The health insurance cost trends for 2004 all indicate another set of double-digit increases and when you drop down to your small business clients, the increases are likely to hit even harder,' he says.
What can agents and brokers do about these rising costs? The usual approach involves raising employee deductibles and co-insurance, adding tighter managed care controls and passing along more of the increases to employees.
But another option, appearing in more and more renewal proposals, is the consumer-driven health plan, a combination of a health reimbursement arrangement (HRA) or medical savings account (MSA) and a high deductible catastrophic-level indemnity insurance policy.
MSAs are funded by employees through payroll deductions while HRAs are funded by employer contributions or combinations of employer and employee contributions.
The plans allow employees to make personal decisions about their health care spending up to the limit of their savings or reimbursement account and buy medical services that may not be covered by standard health plans.
Introduced a few years ago by several small specialty insurers, including Destiny Health in Minneapolis and Definity Health in Oak Brook, Illinois, and designed primarily for small businesses with big health care costs, the plans are becoming more popular and available from a growing group of larger insurers.
'There's a lot more interest and response from employers,' says Klein, and the plans make a lot of sense in light of the continuing trends and changing employee demographics.
As Baby Boomer employees age, their health care costs are increasing. However, they are also getting progressively more engaged in the management of their own health, Klein says. They are fast becoming educated health consumers, ready to manage the responsibilities of consumer-driven plans.
In a survey of 287 employers conducted by consultants Deloitte & Touche, relentless cost increases and a loss of confidence in managed care are driving interest in consumer-driven health plans.
The 2003 Consumer-Driven Health Care Survey, based on data from early this year, revealed that only 11% of employers offered these plans but an additional 8% plan to offer the plans in 2004 or 2005.
About 25% of respondents said they are considering the plan option and may offer it in the future, and 32% said they would consider a new health care delivery system if long-term savings and employee acceptability could be demonstrated.
Consumer-driven plans may also become more acceptable as more well-known insurers offer the coverage option. Fortis Health in Milwaukee, a long-time marketer of small business health plans and short-term health insurance, began offering MSAs in 1996 and HRAs in 2002 after Congress approved the new type of reimbursement account.
Since then, interest has been on the rise, agrees Tim Bireley, vice president of small group product management at Fortis Health, as small businesses absorb greater than average increases.
While MSAs and HRAs both can provide the base level of a consumer-driven health plan, HRAs offer more flexibility to employers who fund the accounts for their employees.
'With an HRA, employers can, for example, choose to pay for nicotine patches and gum, if their employee population has a high number of smokers. In this way, the accounts can provide an opportunity for targeted wellness programs that have great potential for reducing long-term costs.'
Agents and broker focus groups have responded very well to the plan designs, Bireley says.
Aetna, one of the first of the large health plan providers to offer consumer-driven health plans, introduced its Aetna Health Fund in 2002, targeting small employers of 50 or more employees. The program was the direct result of feedback from the Aetna National Broker Advisory Council.
Since then, 140 employers have chosen the plans, including 50 larger, national employers with 3,000 or more employees. These employers offer the programs as employee options and incorporate them into their own self-funding structure, says Robin Downey, head of product development for consumer-driven health plans.
In September, the Health Fund was also chosen by the U.S. Office of Personnel Management as an option for 3 million federal employees.
'Some of the brokers and employee benefits consultants really like these plans and are offering them as one way to address rising health care costs,' she says. 'Moreover, they offer agents and brokers an opportunity to be on the forefront of an important new innovation in health care delivery.
'And a growing number of employers want to offer these plans to employees who are willing to accept more control for their health care spending,' she adds.
In July, Aetna increased its consumer-driven program offerings with three new options:
1. Aetna Dental Fund, a consumer-driven dental fund available as a stand-alone or integrated into the general health care plan. The plan allows employees free choice of providers and allows employers to cover a wide range of preventative services and is available to employers with 250 or more employees,
2. Aetna Long-term Care integrated with the Health Fund. This plan allows employers to reimburse employees with Aetna Health Fund coverage for long term care premiums using unused Health Fund dollars. The plan is available to employers with 1,000 or more employees that offer both the Health Fund and Aetna Long-term Care coverage
3. Aetna PharmacyFund, a stand-alone, consumer-directed pharmacy benefit plan available in 2004 to self-insured employers.
Technology may also help employees accept and make the best use of health insurance options like consumer-driven health plans. According to the MetLife 2002 Employee Benefit Trends Survey, 44% of employers used the Internet for benefits enrollment, up from 15% in 2001. The survey results for 2003 will show another jump in usage to 50%, says Sachin Shah, vice president of institutional e-business in New York.
Cost concerns are the biggest driver to new enrollment technology, Shah says, followed by the growing trend toward employee self-service. Both of these trends support growth of consumer-driven health plans as well as more diversity in benefit packages.
'Employees are moving in the direction of becoming educated consumers who buy health benefits and related services,' he says. 'Technology is the key enabler.'
Shah predicts that within four to five years, all benefits transactions will be electronic and that the technology will also improve both satisfaction and understanding. The MetLife survey found that 85% of employees who access information online said they have a better understanding of their employee benefits.
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The author
Len Strazewski has been covering employee benefits issues for more than 20 years and is employee benefits editor of Human Resource Executive magazine. He has an M.A. in Industrial Relations from Loyola University.
