The bear market certainly helped solve this problem. Still it seems to me that countering this trend are rocketing health insurance costs. A woman I work with just turned 60. Her premium went from $340/mo to $500/mo. She buys individual, high deductable insurance. I pay for my own insurance but get it through the restautant. As I mentioned, last month it went from $231/mo to $313/mo. Won't this trend encourage companies to tailor their demographics toward a cheaper pool of insurable employees? Unless health benies go the way of defined benefit pensions.
A New Health Plan May Raise Expenses for Sickest Workers
December 5, 2001
A New Health Plan May Raise Expenses for Sickest Workers
By MILT FREUDENHEIM
ressed by employers, some of the nation's biggest insurers are introducing
a new kind of health plan that would significantly change the way
employees are reimbursed for ordinary medical expenses.
Most working families, who have relatively low medical bills, could save
money under the plans. But those with several thousand dollars in medical
expenses could wind up paying much more.
Few experts on health care are familiar with the plans. But some health
benefits experts who do know of them warn that they could be more unfair
than current plans to people who are sick and that they could discourage
people who need care from getting it.
The insurers preparing to offer the plans within a year include Aetna
(news/quote), Humana (news/quote), Cigna (news/quote), the UnitedHealth
Group and Wellpoint Health Networks (news/quote). Some are already testing
the new plans on their own employees or even with a few companies. And
several small insurance companies began offering the new plans at a few
companies earlier this year.
The new plans typically require a family to pay an annual premium of
$1,000 to $1,400, slightly lower than the cost of traditional managed
care. Families then receive an allowance of $2,000 to $3,000 each year to
spend on medical expenses, including drugs.
But after they have spent that, they have to cover every cost above that
cap, sometimes up to $5,000 or more. After the higher amount is reached,
the employer picks up most of the bills.
In addition, instead of covering all but a few dollars of the cost of each
drug prescription, some of the new plans will require employees to cover a
much bigger portion of the cost.
The difference between the new plans and those currently covering many
Americans is striking.
As one example, a family of three with $5,000 in medical bills and chronic
medical conditions requiring several widely used prescription drugs could
pay $5,634 themselves, compared with $3,420 under a traditional managed
care plan, according to industry consultants.
"The effect will be to shift more of the costs into the pockets of the
sick people," said Uwe E. Reinhardt, an economist at Princeton University.
"The insurance industry has decided that if you are sick, you ought to eat
the costs. It's a very dubious social policy."
The plans also offer online information to help consumers make their own
medical decisions, including descriptions of different diseases and
treatments, data on the costs of numerous treatments, and a network of
doctors and hospitals that employees can use to keep their medical costs
down.
A family that keeps its medical bills lower than the allowance can roll
over any unspent money to pay medical bills in future years.
But for a family that uses up the allowance, the plans stop paying
entirely until a ceiling is reached. At one company offering the new
plans, employees who use only network doctors are responsible for a
deductible of $1,000 to $5,000 in medical expenses beyond their allowance
of $2,000, depending on the premium they are willing to pay. If they go to
doctors outside the network, their deductible could rise even higher.
For employees whose medical expenses exceed the allowance and the
deductible, the plan typically covers all medical costs provided by a
network of doctors and hospitals. Employees who go to doctors and
hospitals outside the network are covered for 70 to 80 percent of charges
up to $1,000. After that, the plans typically cover all expenses.
Prescriptions often become a much heavier expense. Currently, employers
usually offer a separate drug plan that covers all but a few dollars of a
medication. Under some of the new plans, employees must draw on their
allowance to buy medications, whether they are the low- priced generic
drugs or expensive brand name medications. After they exhaust the
allowance, employees have to cover the full cost of any drugs until the
deductible is met.
For example, a year's supply of Serevent, a widely used asthma treatment,
could be nearly $800 instead of the $120 to $360 that is an employee's
current share in many drug plans. An employer would begin to pay more only
after an employee had used up the health care allowance and deductible.
The insurers say the plans are intended to help companies save money at a
time when their employees' medical costs have been surging, up 10 to 15
percent or more in each of the last two years.
Many companies are seeking ways to transfer to employees more of the
costs, especially of drugs, which have been the fastest-rising medical
cost.
Kenneth Sperling, a consultant at Hewitt Associates, said many employers
were using the plans to shift a greater percentage of health costs to
employees with the highest medical expenses. "As health care costs go up,
it becomes a choice between hitting the users of the system or hitting
everybody," he said.
Insurance executives say that some of their largest customers are
clamoring to try the new health plans, which offer savings for future
costs for the majority of people, who have few medical costs in any given
year. According to a study by William M. Mercer, a consulting firm, 75
percent of all working people account for just 15 percent of employers'
medical costs, with each working family spending $1,000 to $1,500 itself
each year.
Employers say that the new plans can reduce medical costs because
employees have more of a financial incentive to, say, choose a generic
medicine or to avoid a test or treatment that their doctor says is not
necessary.
If the average person knew that a specialized scan cost $600 or $700, "it
might have an influence" on whether she listens when her doctor says the
scan is unnecessary, said Dr. Jack Mahoney, health planning director at
Pitney Bowes (news/quote), which is considering one of the plans for 2003.
But Deborah Chollet, an economist at Mathematica, a nonprofit research
concern, said the new plans could be a barrier to needed care for some
people. The plans would leave families essentially without insurance until
they have spent several thousand dollars, she said. "Uninsured people
don't consume much care" because they may have difficulty deciding whether
care is necessary or not, she said.
"This is taking coverage away from people," said Ms. Chollet, a health
insurance specialist. "And it is obviously a greater hardship for the
lower-income workers."
Insurance and insurance rates are usually designed around the idea of a
pool of risk - the chance that a few members of a group will have high
claims that can be covered by the premiums paid by everyone else. But the
new plans move away from that notion, effectively penalizing people with
higher medical costs and rewarding those with lower expenses.
Indeed, when employers offer both the new plans and traditional managed
care, the new savings accounts may attract largely young, healthy members,
while sicker people stick with plans that cover more of their medical
costs. "There are still huge numbers of unanswered questions," said Tony
Kotin, a consultant in Chicago with William M. Mercer, the benefits
consultant.
Eventually, however, consultants expect many employers to offer only the
new type of plan.
Humana said it began offering one of the new plans to its 14,300 employees
in July and would add outside customers next summer.
Aetna, the largest health insurance company, is offering its new plan as
an option to its own 38,000 employees for 2002. It plans to extend the
offer to large national customers with a total of more than eight million
employees for 2003, said Ronald A. Williams, executive vice president of
Aetna. "We view this as a product, not an experiment," he said.
Wellpoint said it would offer one of the new plans to groups with three
million members in California next year. Cigna said it would begin
offering "a health savings account product" next year. UnitedHealth said
that a Fortune 100 company had asked it to offer a pilot plan, which will
include a health savings account and a "high deductible" of $2,500.
A handful of start-up companies specializing in the new plans, including
Definity Health, Lumenos Inc., Destiny Health and Health Markets Inc.,
began testing the market earlier this year and are accepting both renewals
and new orders for 2002.
Several large employers, including Medtronic Inc. (news/quote), a medical
device company; Charter Communications (news/quote), a television cable
group; and Textron Inc. (news/quote), a diversified financial services and
manufacturing company, are already offering Definity plans to their
employees.
"We can't bear 12 to 14 percent inflation year after year," said Don
Broecker, director of benefits for 17,000 employees at Charter
Communications, based in St. Louis.
Lumenos, based in Alexandria, Va., has sold its version to several drug
companies for their own employees, including Novartis (news/quote), Abbott
Laboratories (news/quote) and Pharmacia (news/quote), and more than 100
smaller companies.
"I liked their spin on health care," said Bruce Gorman, 48, a shipping
manager in Phoenix at Wincup, a plastic cup manufacturer that began
offering the Lumenos plan on Aug. 1. He used most of his health savings
account this year, but does not expect to do so next year.
Destiny Health has signed up 3,000 employees since August at 125 companies
in Illinois and is adding 1,000 a month, according to Ken Linde, the chief
executive of Discovery Health, which owns Destiny.