No question about it, small employers are in a tough spot. But don't despair. "No matter what you hear, small employers are not powerless; they do have options," stresses Halo. Those options include reducing benefits, shifting more of the premium cost to your employees, requiring employees to pay higher co-payments when they visit a doctor, switching from a PPO to an HMO, and covering only employees rather than including family members.
One area ripe for possible savings is prescription drug coverage. In recent years, drugs as treatment have been winning out over more costly invasive procedures. So it's no surprise the cost of prescription drugs has risen rapidly, with insurance carriers passing those cost increases on to employers. Over the last several years, prescription-drug-plan premiums have risen as much as 50 percent, says Ivy Silver, an employee benefits broker in Jenkintown, Pennsylvania.
To offset the cost increases of drug coverage, employers are now asking employees to pay larger co-payments at the pharmacy, says Silver. "Instead of paying $5 per prescription, maybe they're paying $20. That will save some money on your monthly premium," he says.
Silver suggests a "take and give" strategy. If you feel you need to take away a benefit, give back a small one. "For example," says Silver, "if you increase an employee's co-payment, you can increase the vision-care benefit to maybe 70 cents a month per employee."
A trend in the prescription drug area is for small employers to go with a drug card that requires a $5 co-payment for generic drugs, a $20 co-payment for name brands and a $35 co-payment for any drug not on an approved list. "Patients with prescription-drug plans were pressuring their doctors to write them prescriptions for certain brand-name drugs," explains Silver. "They go into the doc's office saying, 'I only want [that brand-name drug], it's the best.' They don't have any idea of the specific differences between the drugs." In the past, says Silver, drug companies marketed almost exclusively to medical professionals, but today, with omnipresent, name-brand drugs advertising in print and on the airwaves, people regularly demand the name brands-and some doctors are giving them what they want, regardless of whether it's cost-effective or not. The drug card's purpose is to curtail that practice.
Meanwhile, the health insurance industry is bringing a variety of new products to market aimed at addressing problems faced by small employers. Aetna U.S. Health Care, for example, introduced its Affordable Health Choices last summer. This plan doesn't have the comprehensive coverage of more expensive plans. "Our intent was to put something into the marketplace to get the attention of small employers, especially ones who had not offered anything before," explains Mike Cardillo, Aetna U.S. Health Care's president.
WellPoint Health Networks, one of the country's largest health-care companies, now offers two group products for small busineses, a Premier plan for businesses offering rich benefits, and an Employee Elect plan for more affordable, employee-selected coverage. "We need to do everything possible to make plans affordable so employers can provide benefits in a price range they can afford," says David Ludwig, a WellPoint senior vice president.
Wisely managing your health-care costs may mean making tough choices in other areas, such as compensation. "I think, over time, we won't see wages grow as fast as they otherwise would because of health-care costs," says Paul Fronstin, senior research associate at the Employee Benefit Research Institute.
It's also important to review your health plan regularly-before you get that notice of a premium increase. Halo advises clients to "look five to six months ahead and anticipate cost increases so you're not surprised. You need to put the idea of rising health-care costs into the mix of your overall compensation. If you do your employee reviews and give 10 to 20 percent increases and then a few months later get stuck with a big increase in your health-care coverage, it's a double whammy."
Health-care costs and insurance coverage have garnered lots of attention on Capitol Hill in recent years. The best-known and most far-reaching piece of legislation is the so-called Patient's Rights Bill. This bill includes a provision allowing the insured the right to sue both his or her group health plan and, by extension, his or her employer. This issue is a political football, and no one knows what, if any, bill will ultimately be enacted. At press time, House and Senate bills were on hold.
The liability issue has the health insurance industry clearly worried. If enacted, many in the insurance industry fear it would trigger an explosion of litigation. Predicts health-care attorney Keith Rosenbaum: "Suing your HMO will be the next big wave in liability lawsuits. The trial lawyers will be lining up to sue insurance companies." Many industry observers feel that patient-rights legislation could have the unintended consequence of pushing up the number of uninsured Americans because employers will simply not be able to afford health-care coverage on account of the liability exposure. Last fall, the U.S. Chamber of Commerce surveyed 769 companies on the topic and found that 25 percent would terminate their health insurance coverage if the right to sue was enacted.
Expect to hear lots of talk about health-care access and containing costs during this election year. No matter what Congress passes, keep your eyes and ears open-it will impact your business.
Aetna U.S. Healthcare, 980 Jolly Rd., Blue Bell, PA 19422, (215) 775-4800
AON Consulting, (301) 280-7500
Apex Management Group, (609) 452-2488, http://www.apexmgmt.com
Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone, 2 Park Plaza, #850, Irvine, CA 92614,(949) 474-1880
The Commonwealth Consulting Group Inc., (215) 884-2600, firstname.lastname@example.org
Employee Benefit Research Institute,http://www.ebri.org
Encore Images Inc., (800) 868-4568
Health Insurance Association of America, (202) 824-1787, http://www.hiaa.org
Health Research and Educational Trust, (312) 422-2632;
U.S. Chamber of Commerce, (202) 659-6000, http://www.uschamber.com
Weiss Ratings Inc., (800) 289-9222, http://www.weissratings.com
WellPoint Health Networks,http://www.wellpoint.com