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.
—Jeremy Smerd
