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Switch to High-Deductible Plans Not Easy for Employers

July 31, 2008
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Related Topics: Benefit Design and Communication, Health and Wellness, Featured Article, Compensation
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For scores of companies that have faced double-digit annual increases in health care costs, making the move to high-deductible health plans has become the ticket to limiting increases by forcing employees to better manage their care and costs.

The switch, however, is never easy, according to experts and companies that have made the change, including Humana Inc., based in Louisville, Kentucky; Sperian Protection USA Inc., based in Smithfield, Rhode Island; and BlueLinx Co. in Atlanta.

"The reality is that for the last 20 years, employees and their families have been insulated from the actual costs of health care," says Randall Abbott, a senior consultant with Watson Wyatt Worldwide who is based in Wellesley Hills, Massachusetts. "This is changing the mind-set of those who’ve been accustomed to not sharing the costs of care. For many, this is a role they don’t want to assume."

A tough sell
Consumer-driven health plans can be a tough sell to employees, some of whom are accustomed to using their health insurance coverage cards at every doctor visit and never seeing a bill thereafter, Abbott says.

"Employees tend to be skeptical of anything new," says Bill Sharon, senior vice president for Aon Consulting in Tampa, Florida.

While employees may be accustomed to $10 or $15 co-payments and the ability to pay modest contributions for expensive emergency room visits and brand-name prescription drugs, those days are over at a host of companies.

For instance, with high-deductible health insurance plans, the coverage doesn’t kick in until the employee first meets that deductible, which pushes workers to act as more savvy consumers when it comes to shopping around for cheaper services and seeking generic drugs.

These plans often come with health savings accounts. These accounts allow employees whose deductibles this year are at least $1,100 for individual coverage and $2,200 for family coverage to contribute pretax dollars into an account to pay medical expenses.

Also, health reimbursement arrangements linked to high-deductible health plans allow employers to fund the accounts that help employees pay for uncovered health care expenses.

Employers are providing cash incentives, usually put in health reimbursement arrangements, for employees who participate in health risk assessments and wellness programs, such as smoking cessation and weight-loss initiatives, steps that experts say can reduce health costs for both employers and employees.

Controversial approach
The move to consumer-driven health plans, though, has its share of controversy.

Opponents of the movement argue that cash-strapped employees will forgo necessary health tests and doctor visits to avoid high bills and that adoption of consumer-driven health plans is another way for companies to shift more costs to employees.

A major issue in implementing high-deductible plans is when employers underestimate employees’ concerns or fail to communicate effectively, says Abbott, the Watson Wyatt Worldwide consultant.

"A lot of employers feel that they can announce [the switch to consumer-driven plans] and leave it there for employees at open enrollment," he says.

Aon’s Sharon says employers also can get into trouble if they "oversell" a consumer-driven plan by making it sound better than it is.

"There are good stories and bad stories out there about how to present these plans," he says. "When the plan is designed correctly and the communication is done effectively, companies can see 40 percent to 50 percent enrollment" in high-deductible health plans.

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