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Embracing consumerism helps employers extend benefits

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NEW YORK—Employers with traditional health care plans can still embrace consumerism by introducing consumer-driven health plan options that have familiar elements of traditional plans.

Although employees may resist changes to their health care benefits, employers should introduce consumerism to ensure the long-term future of their benefit programs, benefit managers say.

New York Life Insurance Co. faced challenges when it considered changes to its medical plans. The company offered primarily managed care plans, with 88% of employees participating in health maintenance organizations or point-of-service plans that provided 100% in-network coverage after nominal copayments. The HMO plans, though, did not engage employees in health care management and benefit officials were concerned because of projected double-digit cost increases, Maria Mauceri, corporate vp, said during the 2007 Employee Healthcare Conference, presented by the Conference Board Inc. and sponsored by Towers Perrin HR Services.

Fundamental changes were required to ensure the long-term sustainability of New York Life's benefit program, but the benefits staff also knew that senior management had a paternalistic attitude and that employees would be resistant to change, Ms. Mauceri said.

"Embracing the consumerism movement at New York Life was a really big challenge for us," she said.

The New York-based company created four new medical plan options that sought to strike a balance between retaining elements of the previous plans while introducing consumer-driven health plan options. The company decided to offer one HMO-only plan, but introduced coinsurance into the plan, she said.

New York Life also introduced three CDHP options linked to traditional health plans. The plan with the lowest annual employee contribution is an HMO combined with a health reimbursement account. The plan features an upfront deductible of $100, with an employer-funded HRA that covers the next $1,000 in medical costs. After that, there is a secondary deductible of $500, followed by 90% coinsurance for in-network services until an out-of-pocket maximum of $3,000 is reached. "It was designed to encourage our HMO participants, particularly those with low medical expenses, to consider an account-based plan," she said.

The company also implemented two preferred provider options, one combined with a health savings account and one linked to an HRA. The plans launched Jan. 1.

While the HMO-only plan had the highest enrollment at 40%, the HRA-linked HMO had 38% enrollment. "We were very happy with the enrollment results we achieved," she said.

CNH Case New Holland, which manufacturers agriculture and construction equipment, also was concerned about rising health care costs after employees began paying 60% of cost increases, said Amy Kesler, director of corporate communications, who is responsible for internal benefit communications at the Racine, Wis.-based company.

The company wanted to create a health care program that increases employee's accountability for their health and their health care purchasing decisions, while reducing yearly cost increases and protecting employees from catastrophic loss, she said.

The company offered four health plans in 2007: a traditional PPO, two HRA-based plans featuring employer-funded accounts and a traditional HSA-linked plan.

"We considered a full replacement strategy, but we were concerned that employees would feel threatened," Ms. Kesler said. "We wanted them to have something familiar."

The medical plans were designed after an internal study found that 50% of CNH'S employees were incurring $1,000 or less in medical claims annually, but were paying family coverage premiums of around $2,600 a year, she said. The HRA plans have deductibles of $250 and $500 for employee-only and family coverage respectively, and the company contributes $1,000 for employee-only coverage and $2,000 for family coverage to the HRA. There is then a secondary deductible of between $750 and $1,500, depending on the plan selected, followed by 90% coinsurance until the out-of-pocket maximums are reached.

Having a secondary deductible helps influence health care decisions, Ms. Kesler said. Although the secondary gap was one of the hardest things to communicate, she did not hear negative comments from employees, likely because the majority of employees would never reach the gap and those that would generally are able to plan appropriately, she said. The company found that average contributions to flexible spending accounts increased by 22.4% during last year's enrollment.

"Change is very hard, especially when it comes in an area such as benefits, which is very personal to employees," she said. "It's part of their compensation and when you alter that, in essence you're altering how you pay them, so we knew the change would be difficult for employees."