If a stranger were to hand you $1,000 and
told you to spend it however you wish,
you may spend it more recklessly than you would if you had worked 40 hours for
that money. It is likely that if you are dealing
with money for which you worked, you will
be more responsible and spend reasonably.
That is how many business owners are
viewing employee health benefits these
days, utilizing consumer-driven health
(CDH) plans to shift the overall responsibility of health care to the employee.
It is inevitable that employees will be
increasingly more responsible, both financially and through decision-making, for their
own health care, according to Sally
Stephens, president of Spectrum Health
Systems. CDH plans can open employees’
eyes to the real costs of health care, particularly prescription drugs. These plans do represent a fundamental shift for employees
and, the more an employer can support
them in the process, the more successful the
plan performance, says Stephens.
Smart Business spoke with Stephens
about the shift of responsibility and how
employees and employers can successfully
prepare for such changes.
Why are employers switching to CDH plans?
There are two primary reasons why
employers are implementing CDH plans: as a
way to shift cost to employees and as a long-term strategy to reward people for adopting
healthy lifestyles. CDH plans represent a fundamental shift in the way employers will
deliver health care in the future. Employers
are increasingly turning to CDH plans as a
solution for controlling the rising cost of
health care. The basic premise is that knowledgeable employees armed with the appropriate information and in part spending their
own money will be more judicious when
consuming health care services. In fact, studies indicate that first-year savings can be as
high as 8 percent of the employer’s premium.
Not everyone is switching to CDH plans. Why
keep a traditional plan?
Employers are not staying with traditional
coverage because they view it as better.
Employers that are not convinced of the
value of CDH plans believe that their employees are not Internet-savvy enough to use the
online tools and many are skeptical about
employee willingness to modify unhealthy
behaviors. Others feel that workers’ unions
would never support such a plan design.
How do employers implement CDH plans and
assist employees with them?
To make CDH plans work effectively,
employers, brokers, agents and health benefits administrators must do more to remove
barriers that prevent consumers from making informed choices. It is vital to communicate early and often using multiple platforms,
such as workshops, written materials and
Web-based tools. To provide employees with
real choice, one must help employees understand how deductibles, co-payments and premiums interact. Human resource managers
can show employees how to annualize premiums, co-pays and deductibles in order to
more effectively evaluate which plans may
provide the most value for their dollars. In
deciding to take this step, many employers
build in time to educate employees about the
new health plan. Some even spend an entire
year preparing employees for this transition.
As long as the employer sponsors the health
plan, it will be responsible for properly educating its employees on the benefits and use
of any health plan it offers.
What do CDH plans offer employees?
One of the main benefits of CDH plans is
that they can force the market to become
more competitive. CDH plans seek to remedy the lack of consumer accountability that
has caused the inflation of health care prices.
With carefully administered plans, employees are given the shield of a Health Savings
Account or Health Reimbursement Account
to minimize the impact of health care costs.
Consumers then can fight back against the
rising cost of health care. This is a long-term
benefit for consumers.
What are the differences between a traditional plan and a CDH plan?
In a CDH plan, employees will be much
more involved in their own health care and
decision-making. They will need to educate
themselves about deductibles and prices.
Price transparency is critical for empowering
consumers to make appropriate health care
choices. Consumers deserve reliable information about the comparative prices and
quality of health-care-related goods and services, however, complete price transparency
is not so readily available at this time. This
makes price comparison difficult. Another
barrier for consumers to making the most of
consumer-driven health plans is the relative
complexity and paperwork involved, when
compared with a traditional plan. With proper implementation and education, the hurdles are manageable, and will lead to better,
more competitive health care in the future.
Do CDH plans raise new financial concerns?
A common concern with CDH plans is
whether lower-paid employees can tolerate
the additional financial exposure. Essentially,
traditional managed-care plans do not alleviate financial exposure so much as control its
variability. Regardless of income level, a
thoughtfully designed plan lowers total cost
share for healthy employees and does not significantly alter costs for the chronically or
critically ill. It is the moderate users who
stand to gain or lose from the change to CDH.
Other users may see costs decrease through
behavior change.
SALLY STEPHENS is the president of Spectrum Health Systems. Reach her at [email protected].