Use Health Insurance Dollars Wisely

Insurance, in its most basic form, is the transfer of risk from one party to another for a given payment. Everyone can understand the example of personal auto insurance. You do not want to risk $300,000 of your personal assets in case you or a family member causes an auto accident. You would rather pay a small annual premium to an insurance company to hold that risk for you.

To make your auto coverage cost effective, you have probably worked with a professional agent to find the best policy. You have also obtained as many discounts as possible, combining your home and auto coverage, multiple car discount, safe driver discount, anti-lock brake and airbag discounts. You have probably also self-insured a portion of your risk.

This is almost identical to what employers do for their group health insurance. It is the same transfer of risk from one party to another. It is the same use of a professional agent to shop the policy. It is the same use of deductibles to retain what employees can afford to pay and premiums to cover the catastrophic costs. But there are three key differences:

1. Health care is used every day.

2. Each of your employees is in a different financial situation.

3. Each of your employees is in a unique health situation.

Because health care is used virtually every day by your employees, the insurance must be easy to use and administer. This means employees must understand the coverage they have and how to best access the resources they need in a cost-effective manner. Simple things, like knowing when to go to the Urgent Care Center and where they get the cheapest lab work, are very important. Do all of your employees know how to optimize their choices? Is there an incentive for them to do so? If not, you are wasting health insurance dollars.

Solution: Design a complete communication plan that educates your employees on all the frequently used services. Use the resources already available from your advisor and carriers. Make it simple and easy to follow. Provide it in multiple formats and deliver it multiple times in multiple ways (group meetings, home mailings, posters, Web site, and so on). If you have a health and wellness committee, encourage the members to beome health resource advocates that other employees can contact with questions. For more complicated questions, direct them to your advisor or carrier.

Because each of your employees is in a different financial situation, a one-size-fits-all plan typically does not work. Your CEO may have hundreds of thousands of dollars in assets to protect in case he or she gets sick or a family member gets sick and needs to undergo expensive and long-term treatment. On the other hand, many of your hourly workers may not have any assets to protect, living paycheck to paycheck. They don’t need to protect against losing assets; they need to protect their health so they can earn a paycheck. As a result, they need a plan to provide access to health services at a price they can afford. Does your plan differentiate between protecting assets and protecting health? If not, you are wasting health insurance dollars.

Solution: Analyze your health plan enrollment and affordability versus your compensation levels. Investigate consumer-driven health plans (Health Savings Accounts [HSAs] and Health Reimbursement Accounts [HRAs]) and “limited medical plans.” You may find you have employees who are struggling to maintain traditional-style health insurance, or who are uninsured, simply because the costs have become too much. A well-designed HSA, HRA or limited medical plan may be able to provide the preventive and routine care with the benefit of deep network discounts at a much more affordable rate. These plans are broadly applicable, with 94 percent of individuals typically using less than $25,000 in claims. Even a traditional plan does not guarantee asset protection. The 6 percent of individuals in these plans who experience a catastrophic medical claim would likely be unable to afford the typical out-of-pocket maximums, anyway. In fact, health care expenses are one of the leading causes of bankruptcy in the U.S. Paying a lot for asset protection for this set of employees is wasting money.

Lastly, each of your employees is in a different health situation based on their lifestyle choices. Given our regional health statistic, it is likely a large percentage of your employees have a high risk for avoidable illness. It is estimated that 50 percent of claim costs are directly related to employee choices. Many employers are starting to look at individual employee health risk factors and deciding it is not fair to continue to ask the healthy to subsidize the risks of those who disregard their health. In fact, this has created competitive advantages for many employers providing financial incentives based on health risk factors. Does your plan permit employees with high health risk factors to transfer these risks/costs to those with low health risk factors? What do you have in place to lower your organization’s overall health risks? If nothing, you are wasting current and future health insurance dollars.

Solution: Design a comprehensive wellness program with rewards and incentives based on goals achieved. Be sure to partner with a qualified third party to implement the plan. Consider phasing in the program throughout a 1- to 2-year period. Focus the program on those risk factors that employees can control with diet, exercise and medication. I believe these should include tobacco use, blood pressure, blood sugar, cholesterol and body mass/percent body fat. These are easily quantifiable and have widely accepted target measures. Consider setting initial targets higher than the ideal and migrate toward the ideal over time. Use a solid Health Risk Assessment to establish the baseline levels. Provide the resources and support, such as Health Coaching, to encourage employees to reach their target before starting the incentive. Communicate regularly to your employees about group progress and plan updates.

Keep your legal advisor informed to make sure your program complies with the requirements for a bona fide wellness program.

Given the level of investment made in health insurance today, you owe it to your organization and your employees to begin addressing these issues. A comprehensive, strategic benefits plan can deliver substantial advantages in meeting your overall objectives and will avoid wasting your health care dollars and your employees’ health care dollars.