Planning for the changes in health care

With the enactment of health care reform last March, employers face a horizon of immediate and long-term implementation deadlines. Concurrently, businesses and organizations are struggling with how to independently bend the cost curve down as it remains to be seen if the law will really effect substantial cost reductions.

First, employers and their health care insurance providers face modifying their plans by September to include:

* No lifetime limits.

* No rescissions.

* Restrictions on annual limits.

* Limitations on excessive waiting periods.

* A requirement to provide coverage for non-dependent children up to the age 26 before 2014, this requirement is limited to non-dependents who do not have employer coverage.

Later in 2014, group health plans must prohibit preexisting condition exclusions and annual limits. Plus, there are other back-loaded provisions that become effective at the same time, including these costlier provisions:

* Penalties for businesses of more than 50 employees that do not offer coverage.

* If the premium exceeds a certain threshold and employees opt out of the employer plan, the employer must pay a penalty.

* Employer coverage must have an actuarial value of at least 60 percent or the business will face penalties.

* Low-income employees whose premium share exceeds a threshold and who choose to enroll in a plan in a state-run health care exchange must be offered a voucher to cover an amount equal to what the employer would have paid to provide coverage to the employee.

Since the penalties tied to the provisions are relatively small, some employers may elect to drop health coverage once insurance exchanges and federal subsidies are in place. Nothing in the health care reform law says an employer must offer health coverage to employees. While penalties may look attractive to employers (especially in today's economy), potential employees will one day seek out competitive benefits in their job searches.

Recent studies support this notion. The Employee Benefit Research Institute found that 70 percent of surveyed workers prefer employer-sponsored health care coverage, with 60 percent saying that health insurance ranks as the most important benefit they receive. A MetLife survey found that 90 percent of people believe employers should offer benefits even if workers pay most or all of the cost.

Even before the passage of health care reform, many companies started undertaking a strategy to rein in health costs by providing employee incentives to take more responsibility for their health and to seek out cost-conscious quality care. In February, Jeffrey D. Alter, chief executive officer of UnitedHealthcare's northeast region said, "Health care consumerism is a revolution that is under way. As we move into consumerism and ask people to take more responsibility for their health, it's important that we do a better job of building a support structure, and that requires innovation. We have to think differently. The way our benefits are provided has to change, and it has to start by giving employees better information so that they can make better decisions, so they can live healthier lives."

UnitedHealthcare research suggests that 50 percent of health care costs can be managed more effectively. It reports excess medical inflation and utilization are major cost drivers. It attributes this, in part, to excess consumer use because "someone else is paying for it." Alter suggests that, "the days of $20 co-pays have to be eliminated." In order for consumers to make better decisions, Alter suggests that timely and personalized information needs to be available. He's referring to personalized biometric data such as body mass index, sugar levels, triglyceride (fat) levels, blood pressure and cholesterol, which would be included within a health-promoting action plan. To ensure employee motivation, incentives would be integral to the program.

"Experience shows that without financial incentives, the emotional connection to a health-promotion program isn't there," Alter said.

Other cost reduction strategies look at physician effectiveness. WellPoint Inc., the country's largest insurer (by number of members), has a pay-for-performance program in primary care that rewards physicians based on technology adoption and generic-drug use. The American Society of Clinical Oncology has been running its own assessment by measuring doctors' performances against national guidelines and is working with insurers to expand the number of participating physicians.

The latest trend in health insurance cost savings that employers have added to their traditional plans or as a sole option are called Consumer-Driven Health Care plans. Research by the International Society of Certified Employee Benefit Specialists in 2009 indicated that 83 percent of U.S. employers offered health saving accounts or health reimbursement arrangement plans to their employees. Aetna found that Consumer-Driven Health Care plans, which offer HSAs or HRAs, have saved almost $30 million per 10,000 enrolled members over a five-year period. Businesses that have supplemented these plans with employee education campaigns, wellness programs and incentives for healthy behavior (i.e. providing full coverage for preventative care) save millions of dollars.

The attractive feature of an HSA is that it is a tax-advantaged medical savings account available to those who are enrolled in a high- deductible health plan. The funds contributed to the account are not subject to federal income tax at the time of deposit. HSAs are owned by the individual, which differentiates them from the company-owned.

HRA that is an alternate tax-deductible source of funds paired with high- deductible health plans. HSA funds may currently be used to pay for qualified medical expenses at any time without federal tax liability or penalty.

So while mandates present budget challenges, businesses can implement additional strategies to minimize costs, enhance employee wellness and improve their health insurance coverage.

Michael Rainey is the dean emeritus of the Workforce Development and Continuing Education Division at Truckee Meadows Community College and past director of the Nevada State Society for Human Resource Management Council. He can be reached at mrainey@tmcc.edu.