Survey Says: More of the Same for Health Insurance Costs
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Are your ears burning? They should be. It seems that lately everyone’s talking about heath care: its impact on them, whether they are consumers or those benefits professionals who deal in this area in companies. You can’t turn on the television nowadays without hearing yet another story about America’s health insurance crisis. This is an issue that isn’t going away in this heavily contested presidential campaign. Health care is at the top of the domestic agenda, and for good reason. As Michael Moore had so eloquently pointed out in his movie, “Sicko,” our current health care system is broken. Millions of Americans have no coverage at all, and those of us with health insurance aren’t that much better off.
The Council of Insurance Agents and Brokers released in spring 2007 the results of its Employee Benefits Market Survey. After soliciting feedback from some of the top agents in the nation, they discovered health insurance is expensive, and costs continue to rise at an alarming rate. Shocker, I know. I’m not so sure we needed a survey to tell us that.
To me, what’s more alarming about the Council’s findings is that employers are still slow to adopt consumer-directed options like HSAs and HRAs to help offset costs. Instead, they’ve opted to stick with more traditional co-pay plans and shift part of the cost to employees in the form of higher deductibles. We have a situation where employers are reluctant to move to high deductible health plans; so instead, they’ve chosen to increase the already high deductibles on their health plans. Clearly, I’m missing something here.
Different is Better
Let’s take a look back over the past few years. Renewal increases have been high. Employers crossed their fingers, hoped for the best, and stuck with the same old plan. And, lo and behold, this past year’s renewal increases were high as well. So what do employers do? They again stick with the same old plan. Shouldn’t somebody out there be guiding them?
Whether or not you believe consumer-directed health plans are the magic bullet, at the very least we can all agree that they’re different. And when the current strategy isn’t working, different is better. But let’s take the argument one step further. Getting consumers involved in their own health care decisions just might work. After all, consumerism is what our entire economy is built on. People aren’t helpless; they are able to make wise purchasing decisions in other areas of their lives, so why not in health care? What is it about health care that makes it so unique? We must strive to simplify these issues and empower consumers and clients through objective education.
So what can a poor health care consumer do if he or she doesn’t know how much a procedure or a prescription is going to cost? Simply ask. True, the consumer may not get a good answer, but the very act of inquiring about the cost of services would be a big step up from where we are right now. And guess what: if enough people ask, health care providers or health insurance companies, or both, just may step up to the plate and start to tell us the price of the most common procedures. But consumers aren’t going to ask as long as they’re shielded from the cost by co-pays. Why would they?
Fortunately, some insurance companies see the writing on the wall. They want to avoid a government-run, single-payer health care system and they know that consumer-directed plans give us our best shot of doing that. So they’ve decided to quit waiting for the providers and have already started to publish cost and quality data on their websites. The tools are out there now, and they’re continuing to get better. Maybe we should start using them.
More for Less
Every summer, around July 4th, I’m amazed at some of the sales in the grocery store. Often times you’ll see a 12-pack of Coke on sale for less than the price of a six-pack. Seems a little counterintuitive. What’s even more amazing to me, though, is that some people still buy the six-pack. That’s sort of what’s happening with HSA-compatible plans. Many of these plans offer more comprehensive benefits than traditional co-pay plans, but at a lower premium. Still, the number one reason both agents and employers give for not moving to an HSA plan is that they’re just not priced right. These may be the same people who are buying the six-packs because the 12-packs are way too expensive.
Consider this example: Where I live, most employer groups have already moved to a fairly high deductible to help keep costs down. It’s not at all uncommon to see a co-pay plan with a $1,500 deductible and another $3,000 in coinsurance risk. So the member’s total out-of-pocket exposure on the plan is $4,500 plus the cost of co-pays. Co-payments, of course, do not count toward the deductible or the out-of-pocket maximum. Hit with a big renewal increase, the group might decide, with the agent’s blessing, to move to a $2,000 deductible plan, adding another $500 to their employees’ already high out-of-pocket exposure.
What I would recommend is moving to a $3,000 deductible, 100 percent HDHP. With this plan, the member does not have the protection of co-payments to be shielded from the cost; the member has to pay the full price for all services until the deductible has been reached. But the member is helped by getting the benefit of the discounts the insurance company has negotiated with contracted providers. So in reality, the member is not actually paying the full cost of those services. And, even better, the amount the member pays for all services, including those historically covered by a co-payment, does count toward the deductible. Once the deductible has been reached, all covered services, including doctor visits and prescriptions, are paid at 100 percent; the member is done for the year. So the member’s overall risk on this plan is 40 percent lower than the risk on the traditional plan, which didn’t even give the member credit for doctor and prescription payments.
To top it all off, preventive care is covered up front at 100 percent on the high-deductible plan, and deductible expenses can be paid with pre-tax dollars if the member chooses to set up a health savings account. All this, and the HDHP costs less than the traditional co-pay plan.
Desperate Times
Desperate times call for desperate measures; make no mistake, these are desperate times. The health care system is in dire straits, and if we don’t do something soon to fix the problem then the government will. If the government gets involved, there is a good chance we won’t like the solution.
As a financial leader, your employees trust you to offer them programs that are friendly to them, or at least they should. Working with your benefits professional, you know infinitely more about your employees' health insurance options than they do. Increasingly, the right solution involves a consumer-directed offering. It won’t be easy at first—there will be a little pain—but in the long-run it will be the best thing for your employees and the best thing for the health care system as a whole.
About The Author
Sharon Alt is president of Alt Benefit Consultants, Inc., and the host of a nationally syndicated internet radio show The Benefits Buzz: Inside Health Insurance in America at www.voiceamerica.com. She can be reached at sharonalt@altbenefits.com. |
