If a stranger were to hand you $1,000 and told you to spend it however you wish, you may spend it more recklessly than you would if you had worked 40 hours for that money. It is likely that if you are dealing with money for which you worked, you will be more responsible and spend reasonably. That is how many business owners are viewing employee health benefits these days, utilizing consumer-driven health (CDH) plans to shift the overall responsibility of health care to the employee.
It is inevitable that employees will be increasingly more responsible, both financially and through decision-making, for their own health care, according to Sally Stephens, president of Spectrum Health Systems. CDH plans can open employees’ eyes to the real costs of health care, particularly prescription drugs. These plans do represent a fundamental shift for employees and, the more an employer can support them in the process, the more successful the plan performance, says Stephens.
Smart Business spoke with Stephens about the shift of responsibility and how employees and employers can successfully prepare for such changes.
Why are employers switching to CDH plans?
There are two primary reasons why employers are implementing CDH plans: as a way to shift cost to employees and as a long-term strategy to reward people for adopting healthy lifestyles. CDH plans represent a fundamental shift in the way employers will deliver health care in the future. Employers are increasingly turning to CDH plans as a solution for controlling the rising cost of health care. The basic premise is that knowledgeable employees armed with the appropriate information and in part spending their own money will be more judicious when consuming health care services. In fact, studies indicate that first-year savings can be as high as 8 percent of the employer’s premium.
Not everyone is switching to CDH plans. Why keep a traditional plan?
Employers are not staying with traditional coverage because they view it as better. Employers that are not convinced of the value of CDH plans believe that their employees are not Internet-savvy enough to use the online tools and many are skeptical about employee willingness to modify unhealthy behaviors. Others feel that workers’ unions would never support such a plan design.
How do employers implement CDH plans and assist employees with them?
To make CDH plans work effectively, employers, brokers, agents and health benefits administrators must do more to remove barriers that prevent consumers from making informed choices. It is vital to communicate early and often using multiple platforms, such as workshops, written materials and Web-based tools. To provide employees with real choice, one must help employees understand how deductibles, co-payments and premiums interact. Human resource managers can show employees how to annualize premiums, co-pays and deductibles in order to more effectively evaluate which plans may provide the most value for their dollars. In deciding to take this step, many employers build in time to educate employees about the new health plan. Some even spend an entire year preparing employees for this transition. As long as the employer sponsors the health plan, it will be responsible for properly educating its employees on the benefits and use of any health plan it offers.
What do CDH plans offer employees?
One of the main benefits of CDH plans is that they can force the market to become more competitive. CDH plans seek to remedy the lack of consumer accountability that has caused the inflation of health care prices. With carefully administered plans, employees are given the shield of a Health Savings Account or Health Reimbursement Account to minimize the impact of health care costs. Consumers then can fight back against the rising cost of health care. This is a long-term benefit for consumers.
What are the differences between a traditional plan and a CDH plan?
In a CDH plan, employees will be much more involved in their own health care and decision-making. They will need to educate themselves about deductibles and prices. Price transparency is critical for empowering consumers to make appropriate health care choices. Consumers deserve reliable information about the comparative prices and quality of health-care-related goods and services, however, complete price transparency is not so readily available at this time. This makes price comparison difficult. Another barrier for consumers to making the most of consumer-driven health plans is the relative complexity and paperwork involved, when compared with a traditional plan. With proper implementation and education, the hurdles are manageable, and will lead to better, more competitive health care in the future.
Do CDH plans raise new financial concerns?
A common concern with CDH plans is whether lower-paid employees can tolerate the additional financial exposure. Essentially, traditional managed-care plans do not alleviate financial exposure so much as control its variability. Regardless of income level, a thoughtfully designed plan lowers total cost share for healthy employees and does not significantly alter costs for the chronically or critically ill. It is the moderate users who stand to gain or lose from the change to CDH. Other users may see costs decrease through behavior change.
SALLY STEPHENS is the president of Spectrum Health Systems. Reach her at Sally.Stephens@spectrumhs.com.