Event: The Conference Board 2007 Employee Health Care Conference
Where: Waldorf-Astoria Hotel, New York
When: February 1-2, 2007. This conference is replayed in March in San Diego for those who prefer sun and surf over the plush luxury of the Waldorf-Astoria.
Why: Because employers want to know they’re not alone in their struggle with health care costs. Most employers recently completed enrolling employees into their health plans for the year. Now is the time to sit back and take stock of what worked and what didn’t. A recent survey by Watson Wyatt shows employers are most concerned about how to effectively communicate with employees.
Show info: For more information on this and other conferences form the Conference Board please go to http://www.conference-board.org/conferences.
Conference Notes, Day 2--Friday, February 2, 2007
The most popular session of the day was the dog-and-pony show given by Revolution Health, the health care company founded by AOL founder Steve Case. Revolution Health launched its Web site last month.
That session was standing room only, which shows the company is creating buzz and interest in the employer market. The company is competing with WebMD for consumers and employer-customers. But WebMD is not worried about the competition.
There's room enough in health care for others, says Steve Cohan, senior vice president for WebMD. Cohan, who was attending the conference, was quick to add that WebMD has the most unique visitors per month (more than 30 million) of any health care Web site. Stay tuned to Workforce Management for stories on how these companies are racing to become the go-to Web sites for employees and employers.
But the most important conversation of the day took place in the Grand Ballroom, where analysts and experts discussed the nagging question in the boardrooms of nearly every American employer: what to do about funding retiree health benefits.
The keyword is defined contribution. Like pensions, employers are moving away from providing health insurance and moving toward helping retirees pay for health insurance in the Medicare market.
Two companies, National City, the financial services company, and Eaton, the industrial manufacturer, presented their approach to a defined contribution solution to retiree health benefits. Generally, both companies reimburse a portion of the cost of health insurance for retirees.
Conference Notes, Day 1--Thursday, February 1, 2007
There is very little new to learn: The story is the same; it’s the details that differ. All employees are struggling with health care costs. The time for cost shifting is over. Employers can no longer wait three or four years to see what will shape up as the latest silver bullet. Instead, 18 months is the time frame consultants are giving to employers as the time they have to introduce new benefit designs.
"We don’t have the luxury of three to four years to respond to this," says Ron Fontanetta, a principal at Towers Perrin HR Services.
Survey: Fontanetta shared a Towers Perrin survey that will be released in greater detail later this month about trends in employer-sponsored health care. Not surprisingly, the average per capita cost of health care has gone up 59 percent for employers in the past five years to $8,796 from $5,386 in 2002. This means that the average cost of health care would be $1,000 more than the $7,500 deductible people would receive under President Bush's health care proposal. This is confirmed in an informal online poll taken by Workforce Management readers.
Employers looking to shift costs should be aware of this: In that same five-year period, Towers Perrin found that the employee share of health care has increased 79 percent to $1,872 of the total cost from $1,044 in 2002.
Each benefit design must be tailored to the particulars of the employer. But the themes that have been present in years past are only getting better defined. Consumerism, of course, is the watchword. The point of consumerism, says Ken Shachmut, the Safeway senior vice president who delivered some of the morning’s opening remarks, is to make sure employees have the proverbial "skin in the game": make employees participants in their health care spending.
At the heart of consumerism is transparency: Employees and employers want to know more about the cost and quality of their care. Employers should demand transparency from vendors, especially those providing data about the cost trends of employees, Shachmut says.
"If you’re not getting the data you need from your vendors, demand it," he says.
Detailed information about a company's health care costs is necessary for creating a strategy to reduce health care costs. The first step is to identify the highest costs.
Shachmut reiterated Safeway’s stance on health care policy. CEO Steven Burd has supported a call by Sen. Ron Wyden, D-Oregon, to provide universal health coverage by ending employer-sponsored health insurance and mandating that individuals purchase coverage. The program would redirect money employers would have been spent on health care and give it to employees in the form of a wage increase.
Afternoon sessions: The highlights of the afternoon sessions were two case studies on what the consulting group Towers Perrin has dubbed "account-based" benefit programs. Stay tuned for more in-depth treatment of this subject from Workforce Management. Until then, here is something that will whet your appetite for innovative health plan designs.
Much has been made about health savings accounts and high deductibles, but according to several studies and much scuttlebutt, most employers remain skeptical. Skeptics believe high deductibles are nothing more than cost shifting and are not worth the administrative headache of changing plan designs and dealing with the lengthy and costly communication efforts needed to educate employees of this radical change.
New York Life Insurance Co. and tractor manufacturer Case New Holland have developed two similar ways of introducing consumerism that offers plan choice among different account-based options so employees feel they have options. You can call these plans hybrids, of sorts.
New York Life: The problem facing Maria Mauceri, a vice president at the insurance company, was making employees more sensitive to the cost of health care in a corporate culture that was traditionally very paternalistic. Many employees have been with the company for decades and this has fostered a sense of entitlement to the rich benefits they have been receiving. Add to this the economic well-being of the company and the fact that upper management was not interested in major changes. Still, the company was projecting double digit health care cost increases unless it made significant changes.
Mauceri combined the company’s managed care plans with a consumer approach. It introduced four plans last year: an HMO only; a high deductible plan with a health savings account (which the company did not fund); and two plans, one an HMO and the other a PPO plan, each with health reimbursement accounts the company funded.
Each of these two plans had upfront deductibles. The HMO has a $100 deductible before insurance kicked in. The PPO plan had a $250 deductible. Then the health reimbursement account covered the next $750 to $1,000 worth of care, after which the employee was responsible for another deductible of between $500 and $750 before insurance paid for medical care.
Mauceri says this was the least disruptive approach to create consumer involvement.
Case New Holland followed a similar approach. The company offered four plans. A traditional PPO plan had a $300 to $600 deductible but higher monthly premiums. An HSA plan, which the company did not fund, had low premiums and a high deductible.
The other two plans were health reimbursement arrangements with a small upfront deductible, followed by HRA reimbursed care, followed by a larger deductible. These plans allowed the company to make the employee more engaged in the cost of health care while creating choices that bridged the gap between an all-out high deductible plan and the high premium, low out-of-pocket plans most companies provide.