Employee Health Insurance: Why Every Small business should consider a Cdhp<br />Presented by Triangle Business Advisors<br />
Can Your Company Afford These Premium Increases?<br />
A unilateral agreement between the employer and insurance company to pay the claims of the employees and their dependents. Premiums are a projection of estimated claims from the risk of your employee group. <br />What is Health Insurance?<br />
Where Does Your Premium Go<br />Most of your insurance premium actually goes to your medical expenses. Insurance companies target profits average between 1and 3%.<br />
What Comprises Health Insurance Premiums?<br />There are three major components of health insurance: <br />“Trend” is an unknown factor and can adjust from month to month.<br />
BLUE CROSS/BLUE SHIELD Medical and Hospital<br />In the beginning of pre-paid health plans, Blue Cross was a “hospital only” plan and Blue Shield covered general medical (non hospital) expenses<br />
Advent of Major Medical Plans<br />Major Medical Plans combined both hospital and medical insurance with common deductible and coinsurance costs to the consumer.<br />
Health Maintenance Organizations(HMO’s) Come to the Market<br />As medical costs rose, HMO’s were developed to control utilization while encouraging preventative medicine, offering free physicals etc. and introduce patient co-payment<br />
Preferred Provider Organizations (PPO’s) Create Provider Discounts<br />Cost controls for PPO’s were developed to increase the doctor to patient ratio by limiting the number of doctors in the network in exchange for the practice of cost effective procedures.<br />
Point of Service Plans (POS) and Dual Option Plans <br />Dual option plans were introduced in the late 1980’s in an effort to compete with HMO’s. Companies could offer one plan vs. major med and HMO, to avoid anti-selection.<br />
Today we have POS Plans with Deductibles<br />In an effort to stop rising insurance costs, deductibles were added to co-pay POS plans. Today 90% of employees in dual option plans utilize in-network plans due to out-of- pocket costs.<br />
Disjointed Healthcare System</li></ul>What Employers are Facing<br />
The affects of Trend<br />Trend is a projection of medical inflation. Trend has a Compounding effect on premiums. These charts show the escalating effect on premiums at a 10% Trend Factor<br />10% Trend increase yields a family monthly premium of $3,400 Per month<br />Adjusted for inflation family premium will be $2,400 Per Month<br />
<ul><li>No one can predict what will happen if the Government gets more involved in health insurance.
Discount networks are effective, but do not control inflationary costs.
Physicians are still practicing defensive medicine (better description of this?)
Health insurance premiums will rise if the current method of reimbursement for health care is continued.
Wellness programs are still popular, but have not produced the results expected.
Unhealthy people will continue to be unhealthy until one of three things happen: 1) They are financially penalized for being unhealthy via insurance costs; 2) They have a medical life event; 3) They are required to pay significant out- of-pocket expenses.</li></ul>Health Care In the Future<br />
<ul><li>The consumer must be involved in the decisions relating to purchase of health care coverage.
The medical care system must become price sensitive
Tort reform is enacted to lessen the practice of defensive medicine.
A decrease of medical malpractice insurance premiums.
Effective wellness programs for employees and families.
A transition to consumer paid health care options.</li></ul>What can be done?<br />
Why Are Companies Moving to Consumer Driven Health Plans (CDHP’S)?<br />
<ul><li>The employer saves a significant amount on premium contributions (20%-40%).
The employer sees long term savings, as trend and utilization costs will be reduced. (Cigna’s 2009 study shows a 3.7% premium decrease (“on what?”) vs. an 11.3% increase on traditional plans.
Lower premiums in today’s market will project to lower premiums in the future Studies show (true?) that it may take 8 years of increases to equal today’s premiums.</li></ul>Advantages to the Employer<br />
Cigna Study Suggests the Following <br />A Cigna Study conducted on CDHP individuals found that employers (or who?) can expect to save up to 29% (of what?) by utilizing a QHDHP vs. a standard PPO.<br />
<ul><li>Over-utilization of medical services by employees significantly decreases.
Employees are more likely to take advantage of preventive care visits.
Employees exercise lower cost prescription options and are more compliant with their medication plans.
Employees are more likely to participate in disease management programs and have higher graduation rates.</li></ul>Advantages to the Employer<br />
<ul><li>Employees and their families become healthier and are more likely to participate in wellness programs.
Employees become more cost-conscious and take advantage of generic drugs, home delivery options and utilize fewer defensive medicine tests.
Employees feel empowered in their healthcare decisions as they are better able to direct their healthcare provider.</li></ul>Advantages for Employees with CDHP’s<br />
<ul><li>A CDHP combined with a Health Savings Account (HAS), helps employees in creating wealth.
Employees can contribute to both their 401K’s/IRS’s and a HSA.
HSA’s are portable and roll over year to year (no use it or lose it)
HSA’s can be used for other medical care such as OTC drugs, vision, dental, etc.</li></ul>Advantages for Employees with CDHP’s (continued)<br />
Creating Employee Wealth<br />This graph shows the potential value of an HSA in 15 years, based on a contribution of $6,000 per year, with $2,000 used for annual medical expenses and a growth rate of the balance at 8% interest per year. This analysis does not reflect tax savings.<br />
<ul><li>CDHP’s could be considered as a benefit cut (Don’t understand this)
A concern that employees will not understand the plan and it’s features/benefits.
A concern that lower-paid employees will not contribute to an HSA (why is this a concern?).</li></ul>Why Haven't More Employers switched to CDHP’s?<br />
Best Practices for Changing to “full replacement” (what’s that mean?) CDHP’s<br /><ul><li>Employee communication is essential.
A transition plan for converting to a QHDHP (1-3 years recommended).
Introduce Hybrid Health Plans or Medical Refund Plans (what are these? They haven’t been discussed so far.)
Select a Health Saving Account that has investment options.