Health-plan upheaval
Providers promote new choices to cut costs that come with some financial risk for employees.
By Robert Rodriguez
The Fresno Bee
(Updated Sunday, May 1, 2005, 7:27 AM)
When Paley
Coffman went shopping for a new health plan, she stumbled into a world of new terms,
options and a trend toward making employees more responsible for selecting their
health coverage.
"When I looked at what was out there, I realized I had to decide on whether I wanted a lower co-payment or a lower deductible," says Coffman, a marketing professional in Fresno. "I also had to figure out how often I anticipated going to the doctor or the hospital. It was a lot of information."
As double-digit increases in health-care insurance plague business owners, health-plan providers are pushing new choices with the promise of lowering costs for employers and their workers.
But along with cutting costs comes some financial risk for employees and a new way of choosing a health plan.
Workers are being urged to become more consumer-oriented. Insurance experts say that if people know how much they are spending on their health care, they will become more careful of how they spend their money.
Choosing the right plan can be tricky. And only a relatively few feel very confident about what they are doing.
"Deciding what plans work best can be like taking a gamble," says Coffman, marketing director at Tempest Technology.
A 2002 survey by the Employee Benefit Research Institute and Matthew Greenwald & Associates found that only 8% of those surveyed felt extremely confident about choosing the best plan for themselves and their families. Thirty-seven percent were uneasy about choosing the right plan.
"I think it is kind of a stretch to think that a lot of people will take the time to do the research," said Ruth Helman, research director for Matthew Greenwald and Associates in Washington, D.C. "A lot of people will do what their doctor tells them." These days, new health-care options can include health-savings accounts and high-deductible plans. The two are often used in combination, but a high-deductible plan can stand on its own.
Under a high-deductible plan, the employee is responsible for a low monthly contribution. But they must pay their own medical expenses up to a certain limit, a legal minimum of $1,000 for individuals and $2,000 for families.
After reaching the limit, or the deductible, the employee's medical expenses are fully or partially covered, depending on their insurance plan.
An HSA works like a medical savings account. The company and employee might make pretax contributions to the account that is used for medical expenses. It is often partnered with a high-deductible plan.
If you're healthy and visit the doctor infrequently, your yearly medical expenses are minimal.
An additional advantage to an HSA is that the money can be rolled over to the next year. But drawing money out for nonmedical expenses is taxable and prompts a 10% penalty.
A third party administers the fund.
Health-insurance brokers have been touting health-savings accounts for the past several years and appear to be finding willing customers.
A 2004 report by Mercer Human Resource Consulting, a worldwide human resources consulting firm, found that 73% of employers surveyed said they were very or somewhat likely to offer the accounts by 2006.
Chris Bettner, executive vice president of business development for Sterling HSA, an Oakland-based health insurance administrator, says her company has enjoyed steady growth since it formed in 2004. The company provides HSA services to several organizations, including the California Bankers Association and the California Dental Association.
Bettner also says employees should take a more active role in choosing which health plan fits their needs.
"People begin to ask their doctors if they need that procedure or that test," she says. "They want to know how many procedures that doctor has done and what were the outcomes."
But most people don't know the actual costs of a routine doctor visit, she says.
"They make a co-payment and that's it," she says. "But the more educated a consumer becomes, the more questions they start asking and they start to think about how they spend their money."
Bruce Hubbard, owner of Diversified Benefit Services, a Fresno insurance company, says it makes no sense for an employee to have a "Mercedes-Benz" medical plan when they may not need anything more than a "Volkswagen" plan.
Hubbard's company began offering health savings accounts to its clients last year, despite taking a "major hit economically." Hubbard makes less money on the accounts because the commission rate is lower.
"We expect that 60% will go towards an HSA," Hubbard says. "We want to be on the forefront of this because we think it works."
Nationally, the cost of providing health insurance increased an average of 11% in 2004, the fourth consecutive year of double-digit premium increases, according to the Kaiser Family Foundation's annual health benefits survey.
Several Fresno-area businesses say that while their health-care costs also have jumped by at least 10%, they are wary of the new health-plan options.
"The idea sounds interesting to me," says Mike Patton, president of Patton Air Conditioning in Fresno. "And I'd like to see how it works with other companies before we do it. But I am concerned about what it means for the employees."
Patton doesn't want to erode the quality and access to health care for his employees. Of the 60 people working for Patton, 10 are nonunion and covered under the company's health plan.
Patton's health care costs increased 10% to 15% this year.
"The protection of our employees is of the upmost importance to me," Patton says.
Patton pays 100% of the premium for his employees and their families. Patton jokes that his insurance representative continually reminds him that he is one of the few employers providing that level of benefits.
At Dumont Printing in Fresno, company President Susan Early has resisted health savings accounts and high-deductible plans. Her 40-employee company has seen its health-care costs increase 15% since last year.
"We have not changed plans, but it is getting harder and harder not to," Early says. "Every time we have an increase, I always look around and see what other companies are doing and what the options are."
Early pays 85% of employees' health-care coverage. And, like Patton, she's also concerned that her employees won't be able to afford out-of-pocket medical expenses.
Christina Castro, an insurance agent with Piggott & Associates, acknowledges that high-deductible plans and health savings accounts are not for everyone. Companies also need to ensure they are providing employees with adequate information.
Castro's experience is that health savings accounts work best for smaller companies with a high number of professional employees.
"I try to provide as much education on these programs as possible," she says. "You have to do that, otherwise you may not get people to participate."
Human-resource experts say the learning curve for some employees can be steep, and they strongly recommend companies do everything they can to educate their work force.
"When companies make changes, like new health insurance, employees can sometimes feel like they are probably going to lose something," says Brenda Budke, executive director of FLG Consulting, a human resources company in Fresno. "So employers need to explain how this is going to be good for them and the employer."
Ruth Evans, of the Evans HR Group, advises employers to schedule meetings with employees weeks, if not months, in advance of the changes to allow time for specific questions.
"Any time you make significant changes, there are always going to be some people who are going to accept change easier than others," Evans says. "But if an employer is communicating with their employees on a regular basis, it makes the situation a lot easier."
The reporter can be reached at brodriguez@fresnobee.com or (559) 441-6327.