Health Care Plans That Work

Holly J. Culhane SPHR
April 16, 2008 — 1,772 views  
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It's no secret that health care costs are spiraling out of control, impacting companies and employees alike.  The key is to find a compromising balance that is practical and palatable to all concerned.  What most organizations have discovered is that one size does NOT fit all; health care plans need to be tailored to fit the individual worker.  Therefore, many employers today are opting for tiered plans which offer a variety of choices to their employees, allowing each individual some input as to the extent, and cost, of his/her coverage.   The concept of tiered health care plans was developed by insurers, and although they lack the tax advantages granted to health reimbursement accounts (HRAs) and health savings accounts (HSAs), they are becoming increasingly popular.  The idea of the tiered plan concept is to offer medical benefits on a scaled basis, with the more expensive programs at the top "tiers" and more economical options at the lower end.  This allows workers to choose the plan that "fits" their particular situation and offers additional choices for options such as higher deductibles versus lower premiums.  Another benefit of these plans is increased competition between health care providers.  As many employees, over time, move down the scale to the less expensive plans, some providers have revised their costs to remain a more viable option.   Employers report that in the beginning many employees choose one of the top tiers.  However, they notice that within a couple of years, workers revise their plans and begin to slide down the scale.  Interestingly enough, numerous employees, over time, opt for the lower tiers even if their own doctors are only available in the higher tiers.  In a number of cases, this has forced medical practitioners to likewise move down the scale in order to maintain their client base.  All of this is good news for organizations as it helps to keep costs in line, while still providing a variety of attractive options for the essential health care benefit.   Insurance specialist, Paul Sheldon, Jr., CLU, ChFC, Owner/Manager of Paul Sheldon, Jr., CLU, ChFC Insurance and Benefits Planning, says, "When offered a choice of tiered plans, I always recommend to my prospective clients that they select a health plan that will give them the lowest overall annual cost exposure. This involves a three-step process: First, determine how much you will pay annually for the health plan you are considering. Second, determine the plan's ‘annual out-of-pocket maximum,' which will include your annual deductible, co-payments and your percentage share of cost (sometimes called ‘co-insurance'). You can easily find your ‘annual out-of-pocket maximum,' per person and per family, on the health plan literature. Lastly, add the figures of these first two steps together to learn your overall annual dollar exposure of the health plan you are considering. The goal is to keep this total as low as possible."   Sheldon further explains, "PPO Health plans that are compatible with Health Savings Accounts (HSAs) inevitably will provide you with the lowest overall annual cost exposure. HSAs and HSA-compatible health plans are revolutionizing the individual and group health insurance market as we know it. Employers can now offer tiered health plan packages that allow their employees the freedom to choose between the HSA-compatible PPO plans and the traditional PPOs and HMOs."   As part of the tiered plans, a number of employers are also offering different levels for prescription drugs.  With the cost of medications sky-rocketing, companies are often requiring that employees share some of the burden, which in part helps to raise awareness as to the actual cost of drugs today.  Most organizations choose a level of co-payments with the lowest cost for generic drugs, a higher level for "preferred" brand-name drugs (listed by the company), and the highest cost for brand-name drugs not on the preferred list.  A typical plan might charge $10 for generic (tier one), $25 for a preferred brand-name (tier two), and $50 for brand-name medications not on the list (tier three).  The idea, obviously, is to direct employees to the generic drugs which are more cost-effective for everyone involved.   In addition to offering different options for health care coverage, some companies are also offering employees "incentives" to lower their health care costs.  One organization offers cash rebates to workers for not smoking and gives different credits to smokers who sign up for programs designed to help them stop smoking.  The company also gives cash rebates to employees who participate regularly in physical activities.  The idea, of course, is that healthier employees will be more productive, as well as lowering risk factors and lowering health care costs.   Other companies are increasing their use of "wellness" programs aimed at changing lifestyle behaviors of employees.  These programs emphasize a healthy lifestyle and teach employees how to maintain their health through effective choices in diet, exercise, and avoidance of harmful substances.  Some other offerings by various organizations include:  credits at fitness centers, a 24-hour "hotline" to talk to a nurse for routine questions, free health-risk assessments, and educational materials dedicated to healthy lifestyles.   Also, many companies today are recognizing the need for a "balance" between work and home and encourage employees to take vacations to prevent burn-out.  With today's technology, employees are often "on-call" 24 hours a day, seven days per week.  Especially for executive workers, the 40-hour work week simply doesn't exist as the lines between work and home become blurred.  Wellness includes time to relax and reflect and completely leave the work world behind for a few minutes, hours, or sometimes, for a few days.  More and more, companies are realizing the connection between physical and mental health.  It's important that both are achieved for optimal health, which results in optimal productivity and overall well-being of employees.

Holly J. Culhane SPHR

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Identified the need for human resource and organizational assistance for small- and medium-sized business­es and formed Profes­sional Administra­tive Systems in 1987. Now known as P A S Associates, this firm combines specialists in the fields of human resources, labor and employment law, affirma­tive action, and substance abuse policies and education, providing an unsurpassed Human Resource Center.