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The next trend in health insurance We are seeing significant renewal
increases on all medical benefit plans and we expect this trend to
continue forward. For
employers to negate these increases there are fewer alternatives
available as the Managed Care industry has cut what it could with the
discounted contracts and access requirements.
Reducing benefits and cost shifting are temporary fixes and not
solutions for the continuing increase of the cost for health care.
Rather than the continuing combination approach of modifying
the current plan and / or cost share arrangements, we have seen
employers and carriers embrace the philosophy of this new approach to
the delivery of health benefits plan.
An emerging trend in the insurance market is an employer
sponsored health benefit plan utilizing a Defined Contribution approach rather than Defined Benefit approach. The
employee population decides how to expend the majority of the dollar
payments for benefits from a combination of individual Personal
Account and the Deductible Corridor.
Personal Account – Each employee in the plan receives from the employer a
predetermined deposit directed to the employees Personal
Account at the start of each benefit year. This is similar to an employer sponsored Flexible Spending
Account. These funds are
used to reimburse the plan participants for health benefit expenses
incurred. Funds remaining
in the account at the end of the year roll over for use the following
plan year. If, the funds are exhausted a plan participant begins to pay
for all health care expenditures, the Deductible Corridor.
Deductible Corridor – This is the deductible after the Personal Account is used, the deductible before Insurance Coverage begins. This
would typically be a dollar level equal to the Personal Account.
A solution for the employee to offset this dollar corridor is
to reduce the out-of-pocket cost with the election of a Flexible
Spending Account. The
employer has moved the deductible from the front end of the plan to
the middle of the plan before the Insurance Coverage
begins. Insurance Coverage – This is the traditional medical benefits insurance
policy. This happens to
be a safety net policy with a high dollar deductible.
The benefits that are covered would generally be catastrophic
illnesses. A deviation to
the above plan design would allow for the coverage of wellness visits
by the Insurance Coverage at 100%.
This will ensure that plan participants continue to appreciate
and utilize the advantages of a wellness benefit.
The Insurance Coverage
has flexibility in the plan design, as this is an indemnity plan
contract. To control the cost for a plan
participant and for the employer, there is an underlying PPO network
utilized, this component of the Managed Care industry is unchanged. As with anything that is new and
innovative there are drawbacks to this approach that an employer most
carefully consider before implementing the plan. 1. The benefit may be
difficult to explain to the employee population.
The employer needs to understand the dynamics of their
particular employee population. 2. The end user, the
plan participant, has the responsibility for both the coordination and
the associated expenditures for accessing healthcare.
While not as difficult for plan participants who are accustomed
to an indemnity plan that is self-directed, this is perceived as
radical for those participants who are accustomed to remitting a $15
office co-payment and receiving care in a Managed Care environment
that is primarily provider and carrier directed. Wait and see is not
always a bad thing, remember not everyone bought high-technology
stocks in the late 90’s. |
