Learn the Issues: Health Plan Benefit Design
What is Health Plan Benefit Design?
Employers that offer health care benefits must make many decisions about the nature of the coverage provided to employees, such as:
• Which medical services will be covered?
• How much will the employer and employee have to pay?
• Which hospitals and physicians can employees use?
• What incentives will be used to encourage employees to make better health choices and to reward health care providers for efficient care?
“Health plan benefit design” refers to decisions employers make about these key features of an employee health benefit package.
How does it affect the business community?
Health plan benefit design involves many choices that can affect how employees use the health care system, workforce health and productivity, and total costs to employer and employee.
Studies show that people are more likely to go to a doctor or hospital or fill a prescription if the cost to them is low. Health care costs borne by the employee are influenced by their current health needs and all aspects of health plan benefit design, including whether:
• a desired benefit is covered
• an employee contribution (cost-sharing) is required and how much
• access to a desired provider is permitted and at what cost
• employees have, and are aware of, treatment alternatives
Thoughtful health plan benefit design can result in a package that offers a provider network and cost-sharing rules that encourage things like using preventive services and regular treatment of chronic disease, while discouraging unnecessary tests and wasteful procedures. However, done poorly, choices and changes in health plan benefit design can have unintended consequences -- especially for people with ongoing health conditions -- including increased hospitalizations, absenteeism, and employer costs.
Recent developments
There has been an explosion of interest in strategies to engage consumers in their own health care and steer them toward higher-value options, including:
• Steering employees toward providers with good cost and quality records.
• Requiring employees to complete a health risk appraisal so employers better understand workforce health needs.
• Offering disease management programs for people with ongoing health conditions and wellness/health promotion programs for everyone.
• Tying employee premium contributions to smoker status
• Offering “tiered” co-payments (lower co-payments in exchange for choosing better performing providers or for selecting generic drugs).
• Offering “optional” benefits
• Offering high-deductible health plans and tax-free health savings accounts.
Employers interested in implementing these strategies should note that certain legal considerations apply, according to the size of their business, industry, and type of funding.
High-deductible health plans represented the first wave of a broader trend known as “consumerism”. Popularly known as “consumer-directed health plans,” this approach trades lower premiums for significantly higher deductibles (e.g., $1000 or more for a single person and at least $2000 for a family). An employer survey sponsored by the Kaiser Family Foundation and the Health Research and Education Trust found that current enrollment in such programs is modest (5 percent in 2007) but likely to grow. A Mercer market analysis estimates that one-third of large businesses plan to offer a consumer-directed option in 2008.
Enrollment trends suggest that this option appeals to employees that are somewhat healthier and wealthier than average. For these enrollees, consumer direction has reduced cost increases in the short term. However, research findings on quality are mixed – with some studies showing that CDHP participants are more likely to delay or avoid needed care -- and warrant monitoring.
To improve quality, the National Business Coalition on Health urges tailoring health plan benefits to workforce health needs and steering employees toward and rewarding good health choices. This emphasis on value is consistent with a recent Aetna study of consumer-directed health plan designs that found that the most successful companies:
• had engaged management
• assessed the health risks of their workforce
• invested in consumer education and information tools
• funded preventive care and wellness programs
• routinely assessed the appropriateness of benefits, cost-sharing, and use of tax-free savings options by employees
Resources
National Business Coalition
Describes principles and gives examples of “responsible” health benefit design. Ten guiding principles and useful tips begin on page 3 of the report.
Employee Benefit Research Institute (EBRI)
Provides reports, statistics, surveys and analysis of employee benefits topics and trends.
Kaiser Family Foundation (KFF) and Health Research and Educational Trust (HRET) Survey of Employer Health Benefits
Provides a summary of findings from the 2007 employer survey.
Health Benefits Education for Small Employers
Provides Department of Labor advice about how to avoid insurance scams that prey on small businesses.
For technical assistance and employer tools related to health benefit design, see:
Mountain States Employer Council
MSEC technical assistance includes consultation with members on legal issues associated with health benefit design.
Midwest Business Group on Health
See “Health Benefit, Health Care & Insurance Information & Tools” near the bottom of the page.