ew York Life Insurance Co. is a good example of an employer that responded to
the limitations of conventional high-deductible plans by tailoring a more customized
health benefit that combines elements of managed care and consumer-driven plans.
The company, based in New York, has a paternalistic streak,
says Maria Mauceri, a vice president and actuary. In keeping with New York Life’s
motto, "The company you keep," its approximately 8,400 employees tend to work there
for a lifetime and have come to expect the company to handle all of their health
care needs.
Facing 10.5 percent increases in health care costs, New York
Life decided in 2005 to change its benefit design to make employees more sensitive
to cost. With the help of consultancy Towers Perrin, New York Life created four
plans that went into effect in January.
The most familiar option to employees is a plan that uses
a health maintenance organization and covers 90 percent of health care costs until
the employee hits a $3,000 out-of-pocket maximum—after which health care is covered
100 percent. (The prescription drug plan is separate and requires co-pays.) On the
other end of the spectrum is a high-deductible plan with a health savings account.
The deductible is $1,150.
In the middle are the two hybrid plans, one that uses an HMO
and another that accesses a PPO network. Each has two deductibles separated by a
health reimbursement account.
"We chose HRAs to give us the kind of flexibility we needed,"
Mauceri says.
For the HMO plan, the first deductible is $100, followed by
an HRA that pays for the next $1,000 in charges, after which the employee faces
a second deductible. This one is $500. The PPO plan is similar, except the first
deductible is $250, the health reimbursement covers the next $750, and the second
deductible is $750. All the plans have $3,000 out-of-pocket maximums for individuals.
Mauceri says the co-insurance and deductibles force employees
to begin to think about how much they are spending on health care.
"Certainly the idea of personal responsibility worked well
with senior management," she says. Programs like disease management and wellness
programs were of little interest.
A portion of the unspent reimbursement account can roll over
into a retirement health care account. Some can be put toward next year’s deductible,
but not all.
"What we’re trying to avoid is someone who would have so much
money in their HRA they wouldn’t have a deductible," Mauceri says.
A portion of savings that employees accumulate will eventually
be available to pay for their part of retiree health benefits that New York Life
employees receive if they are older than 55 and have 10 years of employment. If
they don’t retire with the company, they don’t get a penny of their HRA retirement
accounts. Given these restrictions, 40 percent of employees went with the HMO plan
with no deductible. Thirty-eight percent of employees went with the HMO plan with
an HRA.
New York Life projects savings of as much as 8.5 percent.
It’s not a huge drop, but Mauceri says the goal was to make people sensitive to
cost.
"We were looking for something we could put in place so we
don’t have to change plans every year. This has staying power for multiple years."
Workforce Management, April 9, 2007, p. 30
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