Health Insurance
What Firms Will Do
With Health Care Reform
Look for higher premiums, more wellness plans in efforts to cut costs.
By Martha Lynn Craver, Associate Editor, The Kiplinger Letter
March 22, 2010
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Employers are taking matters into their own hands as they get ready for the 2011 benefit plan year. There’s a growing recognition that the health care bill passed by Congress on March 21 won’t help lower costs in the short term, forcing firms to act on their own if they want to survive. In fact, many employers believe the pending health bill will only add to their problems. “Health reform will result in increased costs for employers, and that will mean less generous benefits for employees,” says Helen Darling, president of the National Business Group on Health.
Most companies will make workers pay a bigger share by raising premiums, deductibles and copayments. These increases will affect both the medical and pharmacy plans. Surcharges for providing health care coverage to working spouses will also increase, to encourage those spouses to use their own employer’s health plan.
But the real emphasis will be on behavior, with businesses using more sticks and fewer carrots to pressure employees to adopt healthier lifestyles and participate in programs to manage their chronic illnesses. In a recent survey by Hewitt Associates, nearly half of employers say they plan to use financial penalties for workers who don’t participate in certain health improvement programs. “Employers have come to realize that they have to manage their risks, not just costs,” says Rick McGill of Hewitt, a benefits consulting firm.
Big bucks are at stake. About 70% of health care costs are driven by behaviors. The difference in cost between a diabetic who manages his or her disease compared with one who doesn’t can be 10 times higher, says McGill.
Workers who don’t play ball will pay more. Employers are realizing that penalties work better than rewards and are planning to ramp them up. To avoid running afoul of federal antidiscrimination laws, businesses can’t base penalties or rewards on results, but they can discount rates for participation. For example, employers will impose higher premiums for smokers who refuse to participate in a smoking cessation class, or will relegate wage earners who refuse to participate in wellness activities to a health plan with leaner benefits.
More firms are also using their own clinics to cut costs, on-site if the company is big or nearby when smaller businesses work together. Clinics offer low prices, convenience and noteworthy success rates.
Also growing: Consumer directed health plans (CDHPs) combining high deductible plans with a tax advantaged savings account. About 60% of companies will make them an option in 2011, up from 54% this year, and 12% will make them the only option, up from 8% in 2010, according to a recent employer survey by Towers Watson and the National Business Group on Health. “Employers offer substantially reduced premiums of between 30% and 50% to encourage employees to choose the CDHP option,” says Ted Nussbaum of Towers Watson.
Having more-educated health consumers is a key goal, with insurers helping firms provide information to employees on cost-effective treatments and comparative pricing. Employers will also provide incentives such as lower copays or no deductibles to encourage workers to use the top performers. There’s ample evidence that higher quality providers have lower costs and employees get back to work quicker, says Nussbaum.
Several big firms are sharing success stories, making it more likely that others will follow suit. For example:
•At PepsiCo., smokers who won’t join programs pay $600 more a year, a policy that has hiked participation 10-fold and boosted smoking cessation rates 14%.
•Boeing targeted employees with complex medical problems for a program in which specialized teams of nurses and doctors monitor care. Average absence rates fell from 7.8 days per six months to 3.4 days. The first two years of the program resulted in a savings of 20%.
•Perdue Farms has 18 on-site clinics and credits them with helping keep worker diabetes control rates at 68%, double the national average.
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Reader Comments (13)
Posted by: Larry at 03/22/2010 12:06:37 PM
So what you are saying is that business will have to lower cost by hiring younger workers, healthier workers, make them go to the lowest-cost doctors, make the reduce weight, stop smoking, stop drinking, stop eating red meat, just in all eat better food all over, lower salt intake, take your medicine on time even if you cannot afford to buy them, cut back on the MRI, CAT, Etc that cost more money. I suppose that the members of the House and Senate will also abide by these rules, fat chance, Just about all of Congress, Supreme Court and workers in the Government drink, smoke, eat bad food, are overweight and have major health problems so why does the regular Joe have to abide by the rules set down by a bunch of sickos.
Posted by: Sam at 03/22/2010 12:12:34 PM
Wow - a health care bill makes companies decide on their own how best to lower their health care costs. So WHAT!?? What the article leaves out is that companies would be doing this whether healthcare passed or not, and that in any environment it's a good thing. Consumers SHOULD be pressured to change their health-care habits in the interest of lowering overall costs. I'd like to hear how the author proposes to lower costs without that component.
Posted by: Steven Valdivia at 03/22/2010 12:16:41 PM
Bad headline and very misleading. ALL will benefit as employees are forced to be healthy. All costs go down for everyone.
Posted by: Andy at 03/22/2010 01:03:54 PM
This whole article is premised on a completely unsupported statment: "Theres a growing recognition that the health care bill passed by Congress on March 21 wont help lower costs" What?!? That is just an opinion. And usually one made by people who make up lies like "pulling the plug on grandma." How about looking at the bill and the analyses and presenting facts, instead of starting with an opinion, and guessing what would happen if that opinion happened to be correct?...
Posted by: Ashar at 03/22/2010 01:45:34 PM
Obama is a bigger IDIOT than Bush. Congress need to see how to reduce the premiums for health insurance and cut massive profits from Managed Care industry who are sucking blood from people
Posted by: ashar at 03/22/2010 01:46:52 PM
What is so good about US doctors that they make tons of money as compare to doctors in Europe and Canada and Australia/NZ. Doctors are blood suckers, they have to pay malpractice insurance and student loans, and we pay for that as insurance premiums
Posted by: ashar at 03/22/2010 01:49:31 PM
With healthier employees, cost will not go down for consumer, but it will increase the bonuses for managed care executives.
Posted by: Gigglesworth at 03/22/2010 02:58:32 PM
Wow! What a disappointingly biased opinion piece. Kiplinger should at least try to be a balanced. Most of the problems described in this article pre-date the March 21 health care legislation. "raising premiums, deductibles and copayments"-- this has been happening for years! Why do you insist this is somehow a reaction to the March 21 legislation? "nearly half of employers say they plan to use financial penalties for workers who dont participate in certain health improvement programs" is ALREADY HAPPENING. I received these sorts of incentives back in 2005 when working for Caremark. As for CDHPs, how many of you can afford a $5000 deductible for your family? And then each family still has an individual deductible (We were quoted $2000 for each child). I can't afford that. The HSA's are a great idea, but why aren't they available to those of us with a regular plan? Those of us on a regular plan can use a FSA, but that money disappears at the end of the year-- what a scam! When I was on the BCBS PPO, I still had to pay thousands of dollars out of pocket because BCBS lied about how much they actually covered.
Posted by: Jerry Uppling at 03/22/2010 05:06:54 PM
I have sold and serviced Group Health Insurance for more than 35 years. Other than accidental injuries, and maternity claims most of the claims are for bad behavior habits. Setting that aside, since when are Employers responsible for the behavior of their employees outside of the Workplace? Because of discrimination rules an Employer can not simply fire an employee just because their personal lifestyle is self-destructive. Some of the suggestions listed above are unfair across the board to all employees. Others are nice, but will become unenforceable under the anti-discrimination guidelines. I see more opportunities for a law suit down the road against Employers. The best solution is to agree to carry a High Deductible Group Plan ($5,000 - $10,000) and then make available (at Employees expense) a Gap Plan to cover the expenses of Medical Care up to the pre-set deductible. This then will avoid exposure to a discrimnation law suit against the Employer and make the employee responsible for their own life-style habits good or bad. Good Workers are hard to find, and keeping them is of greater value to the Employer than retraining a new employee that might not even work out at the job. Somewhere between profitability and competition platforms a Company must do what is best to remain competive in the market place.
Posted by: Cbots at 03/23/2010 10:25:44 AM
Hey, Larry! I work for the feds and--you're right!--I drink, smoke, eat bad food, am overweight, and have major health problems! Oh wait... I'm in perfect health. I do work for the gov't, though. Thanks for making me into a bad person for that, jerk. I'm psyched about passing health care "reform." It's a step in the right direction. Now, they need to start drafting separate legislation designed to cut health care costs. I would like to see Redumblicans (not all of you) vote against that--which I'm sure they will find a way to do.
Posted by: Eric at 03/23/2010 03:17:42 PM
To respond to the statement that health care costs should go down due to healthy incentives... well you would think, but it is a false statement. First, in the short run (and I am talking 5 years), rates and co pays will significantly go up for employers and employees. They have had studies of Disease management and health management for years with no evidence of cost savings in the long run. To add to this, a woman in early pregnancy (or the husband of the said woman) can now get a job and the group plan has to pay for her $20,000+ delivery, with no guarantee she will come back for employment afterwards. Also, a person can just get a job diagnosed with a chronic disease and will get their procedures paid for at the expense of the employer group. No way around it, we just got stuck with the bill resulting from others poor health.
Posted by: Lenny at 03/23/2010 08:42:31 PM
CDHP's increasing?? You got to be kidding! How about some numbers on actual participation when offered on a menu with conventional plans, and some facts about how trends are just as bad or worse with HDHP's. And what about the fact that the majority of HDHP's in the small and mid market are being sold without any employer funding in the HSA so basically they are just catastrophic plans of last resort, but being counted as a CDHP.
Posted by: ronald marek at 04/06/2010 07:02:36 PM
i think all members of congress whom voted for this health care ripoff should drop dead and the congressional members whom voted for this should have their property confiscated and and given back to the people they are robbing as restitution and they should lose there health care in which they enjoy which is separate from what they are cramming down our throat