Consumption plans that work: part 2
Jun 1, 2012
So you just got off the phone with your broker and they said good news…
The medical insurance only went up 10%...
Are you kidding? Now what?
Water down the benefits? Absorb the increase? Pass it through to employees?
Not one good solution…
When the same approach is used the same outcome can be expected.
We had the privilege of writing a piece for Self-Funding Magazine a few issues ago called
“Consumption Plans That Work”
The focus of this piece will expand on the consumption model.
To set the stage a few excerpts from our prior article.
The best benefit buyers seem to consistently reach for is two common ingredients…
1. Buy Wholesale (in network usage)
2. Pay as you go.
This allows for employers to only pay for services that are actually used and in the same breath, pay at the discounted pre-negotiated rates.
Let’s paint a very simplistic picture.
Imagine the current benefit package being offered was illustratively a bottle of Poland spring water.
A one-size-fits-all solution, this provides every employee with a full bottle regardless of their thirst (benefit usage) or need. (Traditional fully insured program)
We alternatively suggest providing the exact same bottle, however without the water, unless needed…
(HRA with a Consumer Driven Health Plan or high deductible)
The employee has the same “water” allowance as in the previous scenario, but he or she must ask for a sip before the water is given.
By setting it up this way 2 big things happen:
1. The employee enjoys a first dollar benefits via the HRA.
2. The employer saves significant “water”, as all insured’s don’t drink…
When we asked our clients how they liked this approach, all liked the economics, none liked the mechanics.
Let’s change gears!
What if we could get the benefit of the consumption model without the difficulty of the mechanics?
We knew we were on to something.
We now have the next chapter in that theme, which really puts a nice ribbon on the box.
(Hypothetical conversation with a renewing client)
We have a wonderful approach to this year’s renewal that will allow ABC Co. to achieve the following;
1. Keep your existing health carrier
2. Maintain current employee benefit levels
3. Save 10 to 12% versus the pending renewal
We were so well received with this conversation we wanted to share our approach with the readers of Self-Funding Magazine.
To properly set the stage it must be noted that the following statistics are pretty consistent throughout the industry.
20% of insured’s DO NOT use any benefit whatsoever.
20% of insured’s use a lot of benefits (over $2,000)
60% use between $0 and $2,000.
These numbers allow for consultants to stack the deck in their clients favor.
Example: Client A has the following plan design
$25 co-pay at the Dr. Office
$10/25/50 RX card
$50 Emergency visit
$500 Hospital admit
The single rate for this plan is $550
They are facing a 10% renewal with no plan changes.
We re-design the plan as follows
$50 co-pay at the Dr. Office
$25/50/75 RX w $100 deductible
$100 Emergency visit
$1,000 Hospital admit
New rate is $500
Clearly the employees DO NOT want this new plan design
Clearly the Employer loves the reduction in premium…
The way to get both employer and employee a win is by changing the dynamic of the HRA funding to a “DEFINED CONTRIBUTION” toward the co-pays.
Let me explain.
In the current plan there is a member co-pay of $25.
In our re-design the employee co-pay is now $50.
We also have a company-sponsored credit card (HRA) that has a $25 available swipe for doctor visits.
This brings the member cost back to its original level of $25. We are buying less insurance from the carrier without hurting the employee.
This methodology is used for RX, emergency room, hospital admissions and co-pays.
Through this approach the employer significantly lowers premium versus the renewal of 10%.
The employee keeps the benefit level of the prior year versus a watering down or increased cost share.
The employee sees the employer HRA portion and appreciates it EVERY TIME at point of service.
Finally, through this approach we eliminate the coordination of EOBs (Explanation of Benefits) and the HRA card issued by the employer, making the whole process much easier.
We are happy to answer any questions and appreciate being part of your advisory circle!
P R I N C I P A L
IPA / INSURANCE PLANNING ASSOCIATES
6800 Jericho Tpke ~ Suite 118W
Syosset, NY 11791
E Fax: 516-977-7474
Bruce Weinstein is Founder and Principal of Insurance Planning Associates.
IPA is a regional corporate benefit-consulting firm that specializes in CDHP / Consumer Driven Health Plans.
For many years IPA has successfully helped clients stay well below runaway trend increases. As early CDHP adopters we have the experience and understanding to assist employers and employees get on the same page with a common goal…
Keep costs down and improve benefits.
Bruce resides with his 3 children Lexie, Max and Jared in Bellmore Long Island.
He is an active member in many charitable organizations. He sits on The Associate board of Parker Jewish Institute for Health Care and Rehabilitation. He is a supporter of The South Shore YMYWHA. For leisure Bruce is very active with his 3 children in their numerous passions including soccer, basketball, music, singing and religious studies.
Bruce is an avid Skier, Mountain Biker and music enthusiast. He has also been with the BMW Car Club of America for over 20 years as a club racer and auto enthusiast.
He can be contacted at (516) 945-6277