The heyday of businesses offering HMO and other 100 percent coverage plans may be coming to an end.
A recent study by Aetna found that in the case of gatekeeper plans, only 1/2 to 1 percent of referrals were denied, while the cost of administration was substantially more than it was for alternative plans.
"What we are seeing is a trend in our industry right now that is getting away from the 100 percent coverage and using different mechanisms to cost share," says Kevin Lurie, president of Progressive Benefits, a 10-year-old health insurance company based in Beechwood.
As it is, health care is the most expensive of all employee benefits. Add to that the fact that the marketplace is seeing a 15 to 20 percent renewal increase annually, and you have a lot of companies struggling to provide comprehensive benefits and control costs.
With the economy still mired in a downturn and health care costs rising, Lurie suggests customizing benefits so that any extra costs are distributed to significantly affect only a small percentage of the group.
"If the company can't afford (a rate hike) they can either pass it on to the employee or they can change the benefit," he says. "If they pass it on to the employee, everyone pays whether they use it or not. If you redistribute some of the cost through co-pays, then you only affect the 10 to 20 percent that really use it."
Businesses can achieve this by shopping around for the right plan and customized benefits. Lurie suggests structuring a plan that includes increases in co-payment and hospitalization costs.
"If you were on a 100 percent plan with a $10 office visit and then changed it to a $250 deductible, and a 80/20 co-pay, a company could save around 12 percent," he says.
In fact, office visits make up 80 percent of all claims; hospitalization makes up only 20 percent of claims but represents 80 percent of all costs. Therefore, an increase in hospitalization co-pays means only a minimal cost increase to the employee.
Add to that a savings of 5 to 6 percent as a result of changing the prescription card from a high level to a low level plan and renewal costs are controlled without significantly raising monthly payments for the employer.
Other options include employers offering two different plans. An employee can pay for minimal coverage or buy-up for more comprehensive coverage.
The problem is that changing health care can affect employee morale. Employees today are acutely aware of their benefits and any changes that affect them. Lurie suggests the best plan is to consider the demographics and the history of coverage when deciding to make a change instead of choosing the lowest priced plan.
"You can have the cheapest plan possible, but if you don't design the plan, you will be jumping companies every year chasing the lowest dollar," he says.
Presentation and honesty are also important. Employers must make it clear that they are sharing the cost of benefits, even if the employee is paying more out of pocket. In the end, Lurie says health care benefits work in the employees' favor.
"If you get an $80,000 heart surgery and it costs you a couple of hundred dollars in co-pays and hospital visits, it is still a good deal." How to reach: Progressive Benefits, (216) 464-6200
Kim Palmer (email@example.com) is managing editor of SBN Magazine.