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Six Steps to Better Health Care Options

January 1, 1999
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Related Topics: Benefit Design and Communication, Health and Wellness, Featured Article
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I "am new in the HR field, and I have to price benefits plans for the new company I'm working for. Can anyone give me a guideline or a checklist of where to start?"

This question was posted on the Benefits Forum of Workforce Online in October 1998. It probably sounds familiar to many HR professionals. But some of the answers may have changed. For starters, consider how many workplaces have moved away from a "father knows best" management style that led to autocratic decisions about benefits. Employee involvement, frequent review and good communication increase your chances of choosing the right health care plan. Experts in the field suggest these six steps:

1. Ask employees what they want.
You may be surprised at the number of employees who want coverage for chiropractic care, acupuncture or homeopathy. Cultural forces and costs are increasing the use of alternative therapies across the country. Age, gender, family status and type of work also influence employees' coverage priorities.

The best way to ensure a good fit between your employees and a health care plan is to involve them in the process. Ask what treatments or options they want in their plans, and what types of plans they prefer. When your surveys come back, post a notice letting employees know what the survey response rate was to remind them that they're involved.

Your survey might reflect local attitudes toward health care plan types. For example, according to research by Milliman & Robertson, a Seattle-based actuarial and business management consulting firm, HMOs are highly regarded on the West Coast and are disparaged in the South. If your company has offices in several regions of the country, look for different preferences based on geography.

2. Offer a choice of plans.
Your survey results probably will reveal to you that you can't cover everyone's priorities under one health care plan. Experts recommend offering at least three plans. Mark Jenkinson, vice president of national accounts for Prudential Insurance Company in Woodland Hills, California, recommends offering a core of consistent benefits across all plans to achieve benefits that apply to as much of the workforce being covered as possible. Jenkinson suggests, "Prozac, Viagra and infertility treatments may or may not provide attractive benefits to a large portion of the workforce." Domestic partner coverage is fast becoming the norm, and alternate family member coverage - such as for an elderly parent or a grandchild - is not far behind. Competitiveness in recruitment appears to be the driving force behind these changes. Consider plans that include them.

John Colberg, an actuary at Milliman & Robertson's Washington, D.C., office, points out that in the past, employees had little impact on health care purchases. The employer offered a plan and the employee participated - or not. Now the employee typically pays a higher portion of the health care premium and the employer functions more as a broker by offering a range of plans and subsidizing the cost of using one of them. "Open enrollment" becomes more open all the time.

3. Show employees the plans and the costs.
Seasoned benefits professionals know some employees believe their health care premiums, payroll deductions and co-payments cover the full cost of their health care. As amazing as that seems, it may reflect the insufficient amount of information their employers give about the real cost of health care. Put together a one-page information sheet that lists the plans you provide, the key characteristics of each and the premium costs to employees. Break down the costs to employees to show premiums for the employee only, employee and spouse or partner, employee and children, and family coverage. Include a final column that shows the employee the total cost of his or her health coverage.

4. Clearly explain the benefits.
Before distributing an insurance company's Summary Benefit Plan, ask yourself whether English is the first language of all your employees. Some benefits specialists rewrite the Summary Benefit Plan in ordinary English before distributing it. (If you do, send a draft of the Summary Benefit Plan to your insurance company for editing and signature so that you can hold them to it in the future. What you write is invariably an interpretation of what they paid lawyers thousands of dollars to write.) Try to put the benefits of each plan into bullet form for easy comparison.

That brings us to open enrollment, a trying time for HR every year. Let's face it: An open enrollment meeting is a performance. The information seems dry, but only when people feel well. When they have a health problem, the information suddenly acquires vitality. Help employees focus on what their choices will mean by giving them hypothetical situations. (No, it's not okay to use real examples from your own company.) Describe an employee who requires prescription medicine to maintain optimum health with HIV infection (prescriptions can cost $2,000 a month), whose plan-covered partner has multiple sclerosis (chronic condition), and whose plan-covered child is accident-prone (requiring emergency department visits). Ask your audience which of the plans you offer would be best for that employee, and why. That exercise will help them apply the same kind of reasoning to their own choices after the meeting.

5. Give employees a confirmation statement.
Once each employee has selected a plan, confirm the selection in writing to avoid confusion. Include the name of the plan, who's covered, basic covered services, deductibles and co-payments (repeating your bullet points from Step Four) and the annual cost. Specify what the employee's payroll deduction will be. Send two copies and ask that the employee sign one and return it to you for the payroll file, and that he or she retains the other. That way, you'll eliminate many potential surprises and problems when the employee uses the plan.

6. Review your plan usage once a year.
In the rapidly changing health care environment, you'll need to review your health care plans before each open enrollment period. Plans with dwindling levels of use probably should be replaced with new options. As you seek to contain costs, it may help to remember that more than 90 percent of your health care costs come from claims submitted by 25 percent of your employees, according to "The 1997 Milliman & Robertson Health Cost Guidelines," a survey by Milliman & Robertson, a Seattle-based actuarial and business management consulting firm. According to the survey, 25 percent of employees have no claims over the course of a year and the final 25 percent have annual claims amounting to less than $300. The heavy users of the health care plan will vote with their feet and may change the balance of plan use when conditions change.

Workforce, January 1999, Vol. 78, No. 1, pp. 89-92.

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