Employer plans.

Navigation: Main page

Author: Unknown

Employers are feeling the heat. In a recent survey jointly conducted by the Washington Business Group on Health and Watson Wyatt Worldwide, 45% of companies reported that their health-care costs went over budget in 2002-03. "Health insurance premiums for employers are up more than 43% since 2000," says Mark Goldberg of the National Coalition on Health Care, an alliance of companies, health-care providers, unions and other organizations. "It's inevitable that more costs will be passed along to employees."

There are some bright spots: The number of companies offering health coverage has been stable. So has the percentage of premiums that employees pay-about 27% of the tab for family coverage. But dollar costs for employees are mounting. Nearly four in five workers now face some sort of deductible before their health coverage kicks in.

And the prospects are that costs will continue to mount. "1 would imagine that there will be another large premium increase for 2004," says Paul Ginsburg, president of the Center for Studying Health System Change. "Although it might not be quite as large as 2003, it's still extremely high in relation to what is happening for earnings."

Consumer-driven health plans Enter the new New Thing for containing skyrocketing health-care costs: consumer-driven health plans (CDHPs). Typically, CDHPs are high-deductible managed-care plans that are matched with healthcare reimbursement accounts (HRAs) funded by the employer. Here's the consumer-directed part: You use your account--typically $1,000 to $2,000 for families, and about half that for individuals-to pay for prescription drugs and medical services from the providers in the network you've selected. (Annual checkups, mammograms and gynecological exams are usually free.) Web tools and call centers are available to help you choose the most cost-effective options. Once your account is exhausted, you face a deductible, usually another $1,000 to $2,000 for family coverage. When you've satisfied your deductible, coverage continues at the usual co-insurance rate. The appeal for employees: CDHPs are generally the lowest-cost choice on a benefits menu.

THE THEORY By making you aware of the true costs of health care, these plans encourage you to make more judicious spending decisions in return for paying smaller premiums.

Cyndie Ewert, director of human resources for outsourcing firm CompuCom, added a CDHP to the company's benefits package in 2002. "My main reason for choosing one was to influence behavior," she says. "People think that a co-pay is what health care costs. It's not." Family coverage under CompuCom's CDHP consists of a $2,000 savings account followed by a $1,400 deductible, then an 80-20 split between employer and employee. Some 30% of CompuCom's 3,500 employees signed up. So far, she says, 80% of the enrollees still have balances in their HRAs, which can be rolled over to next year.

Still, experts aren't convinced that CDHPs will hold the line on costs. "It's too early to tell," says Brad Holmes, a research director at Forrester Research, but he adds that there's "an explosion of interest" from employers. According to a poll by Deloitte & Touche, 35% of midsize and large firms may soon add a CDHP to their benefits package.

BOTTOM LINE If you're basically healthy, the savings on premiums might make a CDHP attractive. But before signing on, review the managed-care component carefully. Lower premiums and prudent spending will be meaningless if the network won't meet your needs for specific doctors, services or therapies. If you have a chronic illness or are unable or unwilling to comparison shop, you should probably stick with a non-CDHP plan.

Tiered co-pays More than 60% of employer plans now divide co-payments for drugs into three tiers: generics (average co-pay, $9), brand names with no generic equivalent ($19) and brand names with generic competition ($29). The message: If you get the cheapest drug, you'll save cash.

This approach is also being applied to hospital coverage. So far, says Karen Davis, president of the Commonwealth Fund, a private foundation that supports heath-care research, about 1.6 million people are enrolled in tiered hospital networks that require a higher co-pay (which can start at $100 a day) at more expensive hospitals in the network. (According to a Kaiser Family Foundation study, 44% of workers face an average $200 deductible for each hospital stay.)

BOTTOM LINE If a tiered plan is among your options, look carefully at your drug and hospital needs before you switch. If you take a lot of medications, ask your doctor if generics are available. If you think you may be hospitalized, make sure your doctor is affiliated with one of the more affordable hospitals available to you. If all your options have tiered copays, beef up your savings to help you manage any additional costs.