IN THIS ISSUE:
? Getting Your Very Own Subscription
? Changing the Health Care Landscape
? Consumer Plans to Get 20% of the Market in 3 Years
? The Leading Point of a Very Large Wedge
? CEOs Help Employees Embrace a New Role
? Health Costs Denting Corporate Profits
? Defined Contribution, the Next Dominant Health Plan
Getting Your Very Own Subscription
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Changing the Health Care Landscape
Jill Elswick does a mid-year wrap-up of the consumer driven market in “Employee Benefit News.” It’s a very concise summary of enrollment, products, and policy reactions. She says employers are past “the tire-kicking phase,” and are implementing the concept in large numbers. “Vendors brag that they can’t get the quotes out fast enough,” she writes. Humana says there is “phenomenal interest.” Definity says it is “dramatic.” Even Kevin Swinton, a spokesman for BCBS of South Carolina, says their initial interest was “defensive,” because they “were constantly being asked about our capabilities in the HRA arena.” Now, after “working with our actuaries? we really see the potential for this to change the health care landscape.”
More specifically, Definity reports its enrollment has increased from 50,000 at the end of 2002 to 170,000 now; Lumenos says it hasn’t lost a client since it started; Aetna has 40,000 members and is marketing fully-insured products in 40 states; Humana says 25% of its 117,000 SmartSuite enrollees have opted for its HRA; Destiny Health has 700 employers and 21,000 members just in Illinois and Wisconsin and is set to roll-out to New England through the partnership with Tufts, and the rest of the country through Guardian; HealthMarket has 2,300 employers and 35,000 members in just eight states.
Despite this growth, the article quotes Jon Gabel as saying, “There’s a great deal of reluctance to adopt it.” I am quoted as saying we are in the “let a thousand flowers bloom stage,” still trying to find the optimal plan design. I also object to the forfeiture provision most employers are using. Destiny’s Stuart Slutzky agrees, saying his company won’t write contracts for employers who don’t make the funds available post-employment.
The article also looks briefly at next-generation vendors such as CareGain, Proweh, Benemax, and Prime Therapeutics.
Consumer Plans to Get 20% of the Market in Three Years
While not quite as enthusiastic, an article by Trevor Thomas in “National Underwriter” also notes that, “Defined contribution health plans (are starting) to make some headway.” It cites several employers who report the plans have “made a huge difference in the way employees use insurance.” One employer says, “Now people are a lot more interested in their personal medical fund and how that money is spent.” Hewitt’s Tom Beauregard says consumer driven plans will have 20% of the benefits market within three years, and EBRI’s Paul Fronstin notes that the number of plans has doubled since 2002. The article reports that large employers typically offer a CD plan as an option to its other plans, while mid and smaller employers tend to use full replacement. When it is used as an option, “some experts fear that the defined contribution plans will appeal mainly to healthy employees?” But Aetna’s Robin Downey says “adverse selection has not been a problem,” according to the article.” “It depends on how you structure your contribution and how it compares to what else is available.”
SOURCE (requires subscription): http://www.nationalunderwriter.com/archives/Lh_archive/2003/L06-30/L200326defined.asp
The Leading Point of a Very Large Wedge
You know this movement has wind in its sails when publications like “The Controller’s Report” start featuring it, as it does in its July, 2003 issue. The article says, “Controllers who are exasperated with rising health care costs might consider the example of Logan Aluminum (which) replaced its PPO with a so-called consumer driven health plan.” The article calls these plans “the leading point of a very large wedge, (because) in 2002, only 13% of large employers were considering offering these plans. But this year, 44% (are).” The article says “controllers have heard good word-of-mouth,” and ticks through some of the early reports of cost savings.
SOURCE: This was published in the July issue, but it is one of those specialized publications that is hard to get access to. Go to: http://www.ioma.com/
CEOs Help Employees Embrace a New Role
It isn’t only controllers and CFOs who are concerned, but CEOs as well, according to Jack Scanlon in “Employee Benefit News.” He reports it is “the cost of health care(that is) causing the deepest furrow” in the CEOs’ foreheads these days. He says, “employers must treat health care differently. CEOs must help their employees embrace a new role: that of participant in the design and use of their benefit programs?” He encourages HR execs to “give the entire C-suite a crash course in employee health benefits,” so they will understand the need for action.
Health Costs Denting Corporate Profits
Roger Yu, writing in the “Dallas Morning News,” also reports, “Higher-level executives are taking greater control of benefit decisions traditionally left to human resource managers, as health costs grow so large that they can dent corporate profits.” Some of these companies are behaving in far more radical ways than simply installing consumer-driven plans. He says 24,000 employees at J.C. Penney came to work to discover they were no longer eligible for benefits at all. The company raised the minimum number of hours required to get coverage from 30 per week to 35 per week in order to restrain health care costs. And, “Fort Worth-based AMR Corp. doubled some employee health premiums and shortened long-term disability benefits to conserve cash and stave off bankruptcy.” He discusses what other employers are doing, including the grocery chain Albertson’s, which is letting employees opt-out of dental and vision benefits and put the money into flexible spending accounts, instead. EDS is installing a consumer driven plan in 2004. The article also looks at some less imaginative moves, including Lockheed, which doubled its physician office visit co-pay from $10 to $20 (Now that’s bold, eh?), and Verizon, which is forcing employees to pay seven percent of the premium this year.
SOURCE (free sign-in required): www.dallasnews.com
Look for 16% Rate Hikes in 2004
Aon consulting warns employers that the run-up in costs isn’t over. They predict, “more of the same in 2004: double-digit increases to the cost of their health care plans.” Specifically, it is looking at premium increases ranging between 15 and 17 percent, depending on the type of coverage. These projections are “before plan design modifications,” and could be reduced by changes in benefits and cost-sharing provisions. The projections are for active workers only. Retiree coverage is expected to increase even more.
SOURCE: Contact Dave Van de Walle at 312-381-5028 or firstname.lastname@example.org
Defined Contribution, the Next Dominant Form of Health Plan
Finally, The Wharton School has jointly issued a paper with Booz Allen Hamilton called, “Consumer Take Charge: Defined Contribution Health Plans.” The paper says, “2003 may be the year that defined contribution plans begin to make their mark as the most influential new form of health insurance coverage since managed care.” Booz Allen’s Gary Ahlquist says, “Defined contribution plans won’t be the final form of American health care, but they will be the next dominant form.” Wharton’s Mark Pauly says, “(these plans represent) a lot of risk for people to take on. Still people feel more capable of handling their own health care rationing today than they did before.”
I’ll be keynoting a “Health Care Summit” sponsored by the Virginia Manaufacturer’s Association in Charlottesville, Virginia on Thursday July 10. I’ll be giving them my “100 Years of Market Distortions” talk.
On Monday, July 14, I’ll be testifying before the House Small Business Committee at a hearing on the difficulties physicians face as small business owners. The Committee’s notice says, “Burdensome regulations and delays in payment both from the private and public sectors make it very difficult for doctors and other medical professionals to operate as a business.” The hearing will be held here in Frederick, MD.
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