There may be hope for consumer directed high deductible plans afterall. Read the following article to learn more.

By Charlotte Huff, Workforce Week Magazine

High-deductible plans, with or without an attached savings account, may provide the best flexibility to meet the coverage limits—both minimum and maximum—inherent in the health reform legislation.

Before health care reform, benefits consultants worried that the insurance overhaul would sideline consumer-directed plans or perhaps jettison them altogether. Their latest sentiment: modest to substantial optimism.

As with any post-reform plan, large employers should carefully structure their consumer-directed options, typically a high-deductible policy paired with another account, such as a health savings account. Ideally, coverage would adhere to a middle ground, meeting the reform legislation’s minimum coverage requirements without becoming sufficiently generous to trigger the so-called “Cadillac,” or excise, tax, beginning in 2018.

But the myriad ways in which these high-deductible plans can be structured likely leave them well situated in the post-reform world, benefits consultants say. Along with the plans’ flexible design, they also cite other reform-related changes as being influential, such as the new limitations on another type of account, the flexible spending account.

“Frankly, these consumer-directed plans are pretty well-positioned,” says Michael Thompson, a principal in the health and welfare practice at PricewaterhouseCoopers. “I think what we’ll find is not a slowing of the process, but actually an acceleration of the process to consumer-directed and high-deductible plans in general.”

Before President Barack Obama signed health reform into law in March, consumer-directed plans were already gaining some traction among large employers, according to an annual survey conducted by the National Business Group on Health and Towers Watson. By 2011, 61 percent of employers intend to offer a consumer-directed plan; the option was provided by only 33 percent in 2006. Meanwhile, nearly half (46 percent) of those who offered a consumer-directed plan in 2010 reported enrollment of at least 20 percent.

As more employees signed up, the cost per employee declined, according to the same survey, which involved 507 employers each with at least 1,000 employees. Annual health costs per employee totaled $6,848 when at least half of the employer’s workforce enrolled in a consumer-directed plan, compared with $7,743 per employee when enrollment fell below 20 percent.

Employers are paying closer attention than ever before to those types of bottom-line statistics, says Alexander Domaszewicz, national health consumerism lead for Mercer. “None of the cost issues and very few of the quality and delivery issues have been meaningfully addressed in the reform legislation,” he says.

Cost pressures
As employers look ahead, one worry is the excise tax. Effective in 2018, a 40 percent tax will be applied to any of a health plan’s total value that exceeds the premium threshold—$10,200 for individual coverage or $27,500 for family coverage.

But Jay Savan, a senior consultant at Towers Watson, says other economic constraints just a few years off will be more influential than the excise tax in encouraging employers to consider a high-deductible plan.

Beginning in 2014, once the health insurance exchanges are established, employers will have an incentive to keep employees’ premium contributions below 9.5 percent of their adjusted gross income if workers earn less than 400 percent of the federal poverty level, Savan says. Otherwise, the employer will have to pay a penalty—typically $3,000 annually per such employee who receives coverage through a health exchange—for surpassing that premium ceiling.

That’s a relatively low bar, Savan says. For a family of four, 400 percent of the federal poverty level is $88,200 annually. If that penalty were in effect today, that employee couldn’t pay more than nearly $8,400 annually toward health coverage.

“The plans that are most likely to allow the employer to stay under that [premium] threshold are going to be high-deductible health plans,” Savan says. “Whether they are HSA-compatible or not, it’s going to be those plans, by virtue of simple mathematics.”

The average annually family health premium, as of 2009, reached nearly $13,400, according to an annual survey by the Kaiser Family Foundation and the Health Research & Educational Trust. But the employee’s contribution averaged just $3,515.

For companies with lower-income employees, though, a relatively low premium can still exceed 9.5 percent of adjusted gross income, Savan says. Add in rising health costs and that likelihood increases, he says.

Establishing guardrails
In a sense, the new health reform law contains inherent guardrails that employers should pay attention to, Domaszewicz says. On the lower end, they should make sure that coverage isn’t classified as inadequate—defined as covering less than 60 percent of allowable costs. But as their plans’ total value increases, employers also need to stay sharp, he says.

“They can’t design them [the plans] too rich because they will eventually hit this excise tax,” he says. “They can’t design them too poor or too skinny because they are not going to meet this 60 percent requirement in terms of actuarial value.”

The reform law’s move to cap FSA contributions at $2,500 annually, beginning in 2013, also may spur employees themselves to take a second look at health spending accounts, says Chantel Sheaks, a principal in Buck Consultants’ National Technical Resources Group. A parent who is facing a large bill for braces, for example, may decide to bypass the FSA and instead contribute a higher amount to an HSA-linked insurance plan, she says.

Another reform-related wrinkle, Thompson adds, is that contributions to savings accounts, including an FSA or HSA, will be counted toward the plan’s total value in determining whether it qualifies for the excise tax. “It’s only a matter of time before FSAs become less common with employers,” he says.

In the years ahead, employers may adopt other measures, such as limiting company or employee contributions to HSAs, to prevent hitting the excise tax threshold, Savan says. But the Towers Watson consultant, a longtime proponent of consumer-directed plans, remains bullish that their time has finally arrived.

By 2013, nearly all large employers will be offering the insurance option, Savan predicts. And more employees will buy in, doubling the current median enrollment of 15 percent to 30 percent or more, he says.

Here are some interesting facts about who visits the ER from The New York Times. One interesting fact to take note of, people with private insurance visit the ER almost as much as people without insurance.

By RONI CARYN RABIN

Americans, insured and not, make ample use of hospital emergency rooms: One out of every five visited an E.R. at least once in 2007, the latest year for which the National Center for Health Statistics has data.

Among the uninsured, 7.4 percent made two or more visits to an E.R., but so did 5.1 percent of people with private insurance. Medicaid recipients were the heaviest users of E.R.’s, with 15.3 percent of them making two or more visits during the year.

Adults in fair or poor health were most likely to go to an E.R. More than a third of them visited an emergency room at least once during the year.

People younger than 65 who said the E.R. was their only health care facility were no more likely to have gone to an emergency room than others, and for those older than 65, there were more E.R. visits by people with a usual source of care than by those without one.

More than 25 percent of non-Hispanic blacks visited an E.R., compared with 20 percent of whites and about 18 percent of Hispanics. For people younger than 75, age made little difference.

In all age groups, about one in five people went to the E.R. But among those older than 75, one in four visited the E.R. at least once.

The uninsured were no more likely to make non-emergency visits to the E.R. than anyone else — about 10 percent of visits were for non-emergencies, whether the patients had private insurance, Medicaid coverage or no insurance.

Figuring out who visits emergency rooms, how often and for what reasons involves sorting out complex interactions among many factors — socioeconomic level, health status, age, health insurance, access to health care and others.

“Our job is to provide the best numbers to inform policy and practice,” said Amy B. Bernstein of the National Center for Health Statistics. “If people are concerned about the use of emergency rooms and how to make their use more efficient or effective, they should have accurate information about who is actually using them — and not who they think is using them.”

Will the new healthcare reform act be beneficial to patients at the cost of being harmful to business? The jury is still out, but onething is for certain, costs will continue to rise in the immediate future.

The Daily – 07/22/10

By Beth Fitzgerald

As the new federal healthcare reform law is phased in through 2014, employers will face increased costs to comply with new regulations and reporting requirements, even as their health insurance premiums continue to rise.

That was the view from Scott Rappoport, CEO of Benefit Sources & Solutions, in

Bound Brook, who presented a workshop on the new law Thursday morning sponsored by the Somerset County Business Partnership. The session was held at Financial Resources Federal Credit Union’s Bridgewater office.

Rappoport reviewed key provisions of the law, starting with the “grandfathering” of healthplans that were in effect when the new law was adopted by Congress on March 23.  Many employers can keep their old plans – but the restrictions are such that, in most cases, it will be too costly to try and hang on to an old plan, he said. “I really believe that in two years, it will be so ridiculously expensive to maintain a grandfathered plan that it won’t make any sense,” he said.

One positive aspect of the law is that it spells out the “essential benefits” – including preventive care – health plans must provide, he said, which addresses a need to “focus on wellness and chronic disease management, and getting and staying well.”

In 2010,employers with fewer than 25 workers averaging salaries of $50,000 or less who pay 50 percent of their health insurance premiums can get a tax credit of 35 percent of the employer’s premium contributions. But Rappoport said in New Jersey, a high-wage state, many small employers won’t qualify.

Yet New Jersey Citizen Action, a consumer advocacy group, this week released a report by Washington, D.C. – based Families USA that estimated more than 100,000 New Jersey businesses could be eligible for the tax credit this year.

Buyer beware! Most people don’t realize just how much out-of-pocket spending a healthplan may cost them until they become seriously ill or are hospitalized. The below article sheds light on the out-of-pocket expenses many consumers face and what they should be aware of when choosing a healthplan.

By WALECIA KONRAD

If you’re like most people, you may think they are the same. But while it is true both terms refer to the portion of medical bills you pay out-of-pocket, these two types of cost-sharing are quite different.

A co-pay is a fixed amount that you pay each time you see a doctor or fill a prescription, usually around $10 or $20. Co-insurance is the percentage of the cost of doctor visits, hospitalizations and prescription drugs that you must pay under your insurance policy.

Let’s say your policy calls for 80/20 co-insurance. After you meet your deductible, you must pay 20 percent of your medical bills; the insurance company is responsible for the remaining 80 percent.

Many plans demand both co-pays and co-insurance. Co-insurance is especially common when it comes to hospital stays. Of all workers covered by an employer-sponsored group health plan, 51 percent must pay co-insurance for hospital admissions, according to the 2009 Kaiser Family Foundation survey of employer health benefits. The average payment is 18 percent of the total. And 53 percent of covered workers pay co-insurance for outpatient hospital visits, with an average charge of 19 percent.

Co-insurance is common in the individual insurance market. And as companies head into this fall’s open enrollment season, many are considering a switch from co-pay to co-insurance as a way to increase employee cost-sharing and contain rising health benefit expenses, said Tom Billet, director for health and group benefits at the consulting firm Towers Watson.

Because of the confusion involving co-pay and co-insurance, many patients don’t realize just how much it may cost them until they become seriously ill or are hospitalized, said Lynn Quincy, a senior policy analyst at Consumers Union. “Ten or 20 percent may not sound like much, but 20 percent of a $100,000 surgery is a lot of money,” she said.

Co-insurance payments can add up quickly for seriously ill patients. It’s not unusual, for example, for a cancer patient to need $40,000 worth of medicine in a given year.

“Co-insurance on that could be as much as $14,000, and that’s just for the drugs. That’s not even counting going to the doctor or the hospital yet,” said Stephen Finan, senior director of policy at the American Cancer Society’s Cancer Action Network.

High co-insurance and other out-of-pocket costs, including insurance premiums, can sometimes discourage patients from receiving the treatment they need. One in three individuals under age 65 diagnosed with cancer has delayed needed health care in the last 12 months, according to a Cancer Action Network poll.

Looks like medical costs are expected to trend well above inflation for 2011. In addition, consumer out-of-pocket costs have increased as employers continue to shift the cost onto employees.

Medical costs are expected to increase by 9 percent in 2011, according to a report from PricewaterhouseCoopers LLP. Although the increase is down 0.05 percent from the 2010 growth rate, it still is expected to outpace the rate of inflation. For the first time, the majority of the American workforce is expected to have a health insurance deductible of at least $400 as more employers return to indemnity-style cost sharing by raising out-of-pocket limits, replacing co-payments with co-insurance and adding high-deductible health plans.

Hospital and physician costs, which make up 81 percent of premium costs, are the biggest inflators of the 2011 medical cost trend. Hospitals shifting costs from Medicare to private payers and employers is seen as the top reason for higher medical cost trends. In 2011, Medicare will reduce payment rates to hospitals for the first time after seven years of increases that almost matched or exceeded inflation increases. Some hospitals that benefitted from higher payments in 2008 and 2009 may be able to manage this type of cut by tapping their reserves, but many hospitals are likely to shift more costs to commercial payers during their negotiations, according to the report.

In addition, increasing consolidation among physician practices is expected to increase their bargaining power. Payers expect to see more negotiating power and higher prices in the short term, but efficiencies created by consolidation will moderate future rate hikes.

The report findings are based on a survey of more than 700 employers from 30 industries and interviews with health plan actuaries.

Another article detailing the rise in healthcare costs particularly for small business and individuals. It’s interesting to note that inflation for 2009 was actually negative, yet healthcare costs continued to rise. What’s the deal?

HFMA

Average healthcare costs for U.S. employers rose 7.3 percent in 2009, up from 6.1 percent in 2008, according to a study by Thomson Reuters. Overall U.S. healthcare spending (including Medicare, Medicaid, and other payers) grew at a more modest 4.8 percent in 2009, according to National Health Expenditures data from the Centers for Medicare & Medicaid Services Office of the Actuary. The U.S. inflation rate was negative in 2009.

Not surprisingly, smaller employers were hit the hardest. Among small employers (less than 5,000 employees), healthcare costs increased 9.8 percent in 2009, up from 5 percent in 2008. Medium-sized employers (5,000 to 50,000 employees) saw cost increases accelerate from 6.5 percent in 2008 to 10 percent in 2009. Among large companies (more than 50,000 employees) costs rose 5 percent in 2009, down from 5.8 percent in 2008.

The study analyzed insurance claims data for 144 small, medium-sized, and large companies that provided health benefits to 9.5 million individuals from 2007 to 2009.