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What Should Health Care Cover

January 1, 1999
Related Topics: Benefit Design and Communication, Health and Wellness, Featured Article
How many opinions are there among Americans about what health care should cover? About 127 million-the number of Americans and their families who are enrolled in employer-sponsored health care plans, according to an estimate from the National Center for Health Statistics based in Hyattsville, Maryland. As health care in the United States goes through what one industry official calls "one hell of a sea change," employees are demanding life vests to protect their preferred treatments and medications. Have you heard these sentiments?

Eliminate limits on prescription medications! Cover all forms of birth control! Make Viagra available to anyone whose health care provider will write the prescription! Absorb the costs of Xenical, a new anti-obesity drug released in September in Britain! But keep the premium costs down while you're at it-they're too high as it is!

When HR sails into decisions about health care plans, navigation gets very tricky. Many Americans would like the impossible from their health care plans: low premiums and full coverage of their particular prescriptions and diagnoses. Add the flammable adjective "deserving" to the debate about who should have which treatments covered and you'll need to dive for cover.

So how does an employer decide what will be covered? How can HR negotiate a plan that steers the company around most of the shoals of difficult coverage decisions? The process includes examining the trends, determining whether or not to be self-insured, and surveying employees about their wants and needs.

What are the trends behind the scenes?
Industry analysts pinpoint several trends that are influencing the health care market. One is the accelerating pace of new treatment development. Industry analyst Kelly Traw, senior consultant in the health care practice division of PricewaterhouseCoopers in Washington, D.C., says she thinks new technology provides an opportunity for employers by provoking companies to "revisit their coverage decisions" and improve their health plans' effectiveness. New therapies are introduced into the marketplace almost every week, and employees are pressuring employers to cover a widening variety of treatments.

Experts interviewed for this article suggest that unless the case is an emergency, an annual benefits review with the plan's third party administrator should be adequate to address a group's changing coverage needs. During that review, the employer and the plan administrator can evaluate the full range of requested coverage in light of overall premium cost and health care utilization. Insurance providers' medical research departments should be analyzing and evaluating the effectiveness of new therapies all the time to provide data for these discussions.

Traw recognizes the pressure that employees who are eager to try a new treatment can put on their employers. She suggests asking, "How urgent is the issue? A lot of employers were asked to make decisions about Viagra as soon as it hit the market. But it needs review. How does it fit the overall corporate benefits philosophy? Does it have other related costs, such as additional administrative costs?" She urges the balanced response of rethinking coverage decisions, but not overnight. A decision like whether to cover Viagra can reasonably take three to six months.

Another trend sharpens the focus on classifications of people who take higher-than-average risks with their health. Industry analysts see an increasing trend by employers to charge employees additional premiums for potentially hazardous activities or conditions. This includes additional premiums for smokers, sky divers, obese persons, drinkers, motorcycle riders or pilots of private planes. Although most group coverage is offered to everyone in the group at the same rate, according to Richard Coorsh, a spokesperson for the Health Insurance Association of America (HIAA) in Washington, D.C, the practice of charging a premium appears to be legal as long as no individual is targeted. Higher premiums for smokers, for example, would apply to all smokers.

In addition, many employers are increasing pressure on insurance companies to cover new procedures whose benefits may decrease eventual costs, such as prenatal HIV testing. For example, experts from the Institute of Medicine, part of the National Academy of Sciences, now recommend that HIV testing be required for all pregnant women and that their insurance companies cover the cost.

Another trend affecting health care options is direct marketing of new medications by pharmaceutical companies directly to consumers via television and other advertising. From this marketing, a new attitude toward prescription drugs has emerged. Consumers now "shop" for medications rather than assuming that only their health care providers can offer access to them. Virtually all prescription medications, including narcotics, are now available on the Internet, often from outside the United States-and outside the purview of the Federal Food and Drug Administration.

ABC News medical editor Timothy Johnson refers to this easy availability of prescription medications of questionable quality on the Internet as "pharmacological Russian roulette." Employers may be completely unaware of the phenomenon of direct purchase of medications until an employee with an adverse reaction rushes to a hospital emergency department. Does your plan cover treatment for harm caused by a drug manufactured outside the United States in substandard labs?

Medical information on the Internet has other effects, including increasing employees' knowledge about health care. The Journal of the American Medical Association (JAMA) devoted its entire October 21, 1998 issue to the impact of the Internet on health care delivery. According to the publication's research, nearly 40 percent of people who use the Internet are seeking medical information. The good news is that American consumers of health care can now more readily learn about their options. The bad news is that some of the medical information on the Internet is trash.

Mark Jenkinson, vice president of national accounts for Prudential Insurance Company's West Coast office in Woodland Hills, California, insists that Internet access to medical information is essentially a benefit. "I'm a huge proponent of individuals taking responsibility for things that impact their lives. You wouldn't talk to one person in only one car dealership to purchase a car. With medicine, there's a tendency to want to believe everything a health care provider tells you. The Internet provides an efficient way-without challenging a doctor-to explore an array of data and to prepare yourself for an intelligent conversation with everyone involved in providing and paying for care." Traw agrees, stressing that plan design increasingly emphasizes employees making conscious decisions. Access to more information helps that process.

Ask employees what's important to them.
Given all the above, today's employees are far less ignorant of health care options than they may have been in the past. They definitely have opinions about what they want-so ask them.

HIAA is an industry association, but it's also an employer that provides health coverage to its workers. HIAA asked its employees what was most important to them, and then made decisions about coverage accordingly. By surveying as such, spokesperson Coorsh suggests employers will find, for example, that a predominantly female workforce of childbearing age will probably value highly a comprehensive health maintenance organization benefit that includes pre- and post-natal care. HR acquires a valuable navigational guide by asking what employees want. Then HR's next task is to preserve the ability to choose.

HIAA's review of market trends reflects that the fastest-growing plans in the country are those with flexibility. Coorsh explains that there was some thought in the early days of HMOs that employer health plans would all "morph" into HMOs. Instead, "employees told us that they wanted flexibility." According to Dan Person, vice president for national marketing for Prudential Insurance Company at its Roseland, New Jersey headquarters, we can anticipate employers looking for more freedom for employees in response to employees' complaints about the confines of managed care.

The trend Jenkinson sees on the West Coast, for example, is that some employers are looking for a less managed care plan design, even if it costs a little more, so that employees can have more options. "There's a resurgence of interest in more open access plans, probably a response to the images out there about managed care," he says.

Today's employees are far less ignorant of health care options than they may have been in the past. They definitely have opinions about what they want-so ask them.

Providing choice based on employee feedback is good, but it's important to also let employees know what the company's limitations are. In this era of cafeteria-style benefits plans, employees increasingly view individual benefits within plans as negotiable. (I want the HMO, but I want to be able to keep seeing my favorite chiropractor.) Yet few employees are aware that when an employer buys a fully funded plan rather than becoming self-insured, the state insurance commission-not the employer, and not the insurer-regulates which benefits that plan must include. Many fully funded employers are small businesses that can't afford to self-insure, so the list of a state's mandates becomes the profile of the plan's benefits for financial reasons.

Self-insured plans bypass state mandates. Coorsh explains that medium- and large-size companies usually self-insure and then purchase reinsurance, which indemnifies them for a dollar amount. For example, if an employer that is covered to the level of $1 million in claims has a terrible year and goes over that level, then reinsurance would help to defray the additional costs. In these environments, tough decisions about coverage land on the plan administrator's desk. So the first decision an employer makes is whether to be fully funded or to self-insure. But once this decision is made, employers still have many options.

A small employer gives employees amazing choices.
Community Partners is an incubator for nonprofit organizations. Emerging nonprofits can organize and rent space at Community Partners as they learn to build budgets, raise funds, build boards of directors and prepare to function independently. The emerging organizations' payroll and benefits are managed by Community Partners during the incubation, so there's a fluctuating number of covered employees on the health care plan. Full-time employees have full medical and dental coverage; part-time employees may purchase medical coverage. How does Community Partners meet such a diverse and shifting need?

Janet Elliott, vice president for finance and administration, turned to an insurance broker for help. Her bottom line was wanting to preserve existing relationships that her employees had already established with their doctors, and she knew they used a wide variety of doctors and services.

She emerged as a customer of the HIPC (Health Insurance Plans of California), a coalition of insurers that gives Community Partners employees a choice of 12 to 15 HMOs and a POS (point-of-service) option. HIPC is a private provider of health care insurance for groups in California as small as one or two employees. Covered benefits under the plans are quite uniform, but Elliott reports the plan preserves choice in these areas: which doctors participate in the plan, which medications are covered in the prescription plan (absence of a prescription the employee fills every month could make a large difference), degree of coverage for alternative medicine such as chiropractic, location of the plan's clinics or medical practices. The 20 to 30 full-time Community Partners employees are enrolled in at least five or six different plans under the HIPC. Premiums vary slightly, but the employer covers them unless the employee is paying for dependent coverage.

Elliott explains that if one of Community Partners' employees faced a serious health problem and wanted a procedure not covered by the plan, that discussion would take place entirely between the employee and the plan. Using the HIPC has been so successful in meeting employees' diverse needs at a reasonable cost that Elliott is considering adding vision care this year to remain competitive in recruitment.

A medium-size employer makes the transition to self-insurance.
Martin Management Group took a different approach. When Blue Cross/Blue Shield threatened a 35 percent overall rate increase for Kentucky-based employees and the West Virginia store experienced a premium increase for family coverage to $553 per month, Dawn Souders, manager of corporate human resource development and support at Martin Management Group, turned to an insurance broker for advice.

With 400 employees in eight dealerships in four states-Kentucky, Ohio, West Virginia and Iowa-this company, an automotive group with corporate headquarters in Bowling Green, Kentucky, needed consistency among its health care plans. Martin Management Group now offers a uniform health care plan to all eight dealerships for the first time. Souders' goals were cost savings and uniformity, and she achieved both.

Souders took the existing Blue Cross plan document to the broker and asked to mirror its provisions in the new coverage. "In Kentucky, we had the best coverage, and we wanted the new plan to be as good or better." Souders wanted to keep the Kentucky plan's deductible and co-pay amounts, vision care, dental care and the co-payment amount for prescriptions. She didn't survey employees initially, but she knew the coverage she had and was determined to improve it.

Now, in the plan's first year, she solicits suggestions from employees for coverage. At the close of the first year, she'll review the coverage with the plan administrator to find new therapies that should be covered and underutilized coverages that can be eliminated. Responding to an urgent request, she has already added coverage for a treatment for sleep apnea, a condition that causes a person to stop breathing during sleep. "So far, everyone is pleased with the premium costs going down," she explains.

Souders would not necessarily recommend the changeover at the pace she set; her research began in late spring and the new plan went into effect in late summer, so employees are still calling with lots of questions about how the new plan works. But the change has been so positive that Souders plans to add dental coverage to the self-insured plan on January 1 this year.

Use research and reason to choose coverage.
What does the Martin Management Group plan cover? Yes, it covers birth control pills, but not Depo-Provera(R) or birth control implants. No, it doesn't cover Viagra and acupuncture, but it does cover chiropractic services. Souders followed the counsel of her third party administrator on these decisions, based on concern about health risks and whether the treatment has a solid track record. Souders explains that when they face a difficult decision, she will work with the third party administrator to evaluate whether covering the claim would damage the company's experience. She's not medically trained, so she relies on the administrator to do the research.

Souder's Depo-Provera(R) decision serves as an example. Counseled by the plan administrator that birth control pills have been on the market and have been tested for a long time with a good track record, she decided to cover them. But Depo-Provera(R) and Norplant(R) are less widely tested, can have more significant side effects, and are much more difficult to reverse once the decision to use them has been made. Those kinds of variables govern the decisions that buyers of health care plans must make. Martin Management Group has supplemented the self-insured plan with stop-loss coverage for a claim that exceeds $25,000.

Clearly, there are multiple ways to meet your goals, and determining which way to go isn't a smooth ride. But if you start with what employees want, review benefits decisions more frequently and educate employees continually about the options and costs of coverage, the waters will settle-but they won't calm.

Workforce, January 1999, Vol. 78, No. 1, pp. 82-88.

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