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Tags: Employers | Employees | Health | Insurance | Consumers

Employers Must Make Their Employees Smarter Health-Insurance Consumers

Employers Must Make Their Employees Smarter Health-Insurance Consumers

Bryan Kuderna By Saturday, 18 November 2017 02:06 PM Current | Bio | Archive

By definition, a job interview entails an interviewer and an interviewee, kind of like this article. 

However, the roles of each party are not so clearly defined, often meshing into a data gathering session by both sides. 

Qualified candidates examine a variety of key factors beyond just salary before choosing their future workplace. 

Glassdoor’s 2015 Employment Confidence Survey revealed that 60% of people report that benefits are a major concern in whether to accept a job offer.  The survey also points out that 80% of people would prefer an increase in benefits over a pay raise. 

This broad term of “benefits” comprises everything from flexible hours, paid time off, and working remotely, to fancy perks made famous by the likes of Google- massages, professionally cooked lunches, yoga classes, and more.  However, none supersede the consideration given to health insurance.

I recently had the pleasure of sitting down with Dan Campbell, Managing Partner of Campbell Petrie, an employee benefits consulting firm.  As the debate over repealing, replacing, repairing, or retaining Obamacare rages on, we focused in on what it’s like to advise such a controversial service…

Kuderna:  It seems the Average Joe just takes whatever the employer offers, often not looking at their medical plan again for years?  Does an employee have a choice in plan or carrier?

Campbell:  This is typical.  If medical is not important to that employee, it won’t be a factor in their decision to take the job.  For some people however, this will be a large influence in accepting a role or not because they are looking to support themselves or their family for medical needs.  Choices tend to grow as you work for a larger employer, but the norm is a single carrier solution with a few different plan designs to choose from.

Kuderna:  When does an individual get to pick Employer or Individual plan?

Campbell:  You can buy an Individual plan at any time, so long as you are coming into the plan with no gap in coverage.  By all means, if you found a plan that was cheaper and more closely aligned with your needs, you can opt out of the employer plan and enroll.  The plans on the exchange will ask if you have EMPLOYER coverage because the answer to the questions will determine if you are eligible for a government subsidy to lower your premium.  If your employer offers “Affordable Minimum Value Coverage” you wouldn’t qualify for an income based subsidy. As far as specific time of year, it would be at the company’s open enrollment date or the annual open enrollment for the individual market at the end of the year. 

Kuderna:  When does an employer have to provide group health benefits?

Campbell:  They are required to offer a health plan if they have 50 or more Full-Time Employees. However, they can also decide not to offer and pay a fine. 

Kuderna:  What kind of fine?

Campbell:  If you are an ALE (Applicable Large Employer) there are two penalties you could face if you decide not to offer coverage or if you don’t make it Minimum Value and Affordable for your employees.  The first penalty is for no coverage at all and this is a $2,000 penalty per employee minus the first 30 employees (i.e. 100-person group would pay 70 employees x $2,000 or $140K…probably cheaper than sponsoring a plan.)  If a group offers a plan where it is either unaffordable or doesn’t meet minimum value requirements, they face a penalty of $3,000 per person who goes onto the exchange and purchases a health plan with a subsidy.

Kuderna:  What's the biggest mistake you see an employer make when it comes to their health benefits plan?  What about an employee? 

Campbell:  I think too many employers get tied up in little things like network and dollar amounts for co-payments when they should be focusing on making their employees better consumers.  I also think employees make this same mistake.  They pay a lot of wasted dollars into a system that is set up to manage the large chronic claims of their peers.

Kuderna:  Exactly how do we become better consumers?

Campbell:  Employers often get very concerned about the network of doctors and the copayments associated with doctors’ visits or hospital stays, but what they really should be focusing on is making their entire population healthier with financially incentivized participation based wellness (i.e. having employees shop for healthcare using a transparency tool for procedures like MRI, colonoscopy, etc.)  If each employee was making more responsible purchasing decisions then much of what is driving utilization could be avoided.  Also, this stems back to making sure that employees have a great relationship with their Primary care doctor… groups that have on-site or near site primary care tend to have better claims because there is a healthcare professional that has a great relationship with each patient and they can drive the employees to best in class and price treatment, avoiding ER and Urgent care visits that tend to drive spending.   With regards to the employees, so many of us buy the best plan or the lowest out of pocket plan when we are offered a lower cost/higher out of pocket plan.  I think that many people over-insure themselves from a health insurance perspective, leaving the bulk of your premium dollars going to offset the costs of a chronically ill coworker.  The choice to take the lower cost plan is there, but often people don’t understand the choice they have.

Kuderna:  Headlines are plastered with the rising costs of healthcare/health insurance; to what do you credit these unstoppable increases? 

Campbell:  Insurance prices follow the risks that they insure and apply a profit to them in order to run their business.  The delivery costs of healthcare and pharmaceuticals are increasing rapidly and insurance premiums need to adjust to keep up with the risk and maintain a profit for insuring that risk.

Kuderna:  For that matter, are they stoppable?  Any particular change you'd like to see in the industry?

Campbell:  Everything in an inflationary environment gets more expensive so I don’t see cost increases stopping, but I think they can be slowed down if employers, employees, and healthcare providers work together.  We are getting to a point where everyone is realizing the amount of waste in the system and are tired of paying the costs associated with that waste.  I would personally like to see more innovation in the space.  There are very few new players in our space that don’t get taken over or absorbed into one of the legacy insurers within a few years of achieving success (or failure).

Kuderna:  What kind of innovation are you speaking about?

Campbell:  The overwhelming majority of premium spent for each plan on healthcare is for a small group of their employees and dependents.  If government really wanted to help employers and insurance companies pricing, they would help the employers or insurers on catastrophic claims above a certain threshold, specifically for certain on-going expensive diseases like ESRD, HIV, HEMOPHELIA, NICU patients, some cancers, and other high cost auto-immune diseases.  If a plan or employer knew that at a certain threshold these claims would be taken over by a government backed system, the rest of the population would greatly benefit through lower premiums.  My firm currently helps our customers carve out some of these procedures (i.e. Dialysis or Infusion Therapy) and pay them based on a percentage of Medicare as opposed to the traditional network pricing, which could be 50-60% more expensive.

Kuderna:  Most insurances I'm aware of (auto, home, life, disability, etc.) all involve some form of underwriting.  Is there such a thing in health benefits?  Does someone in perfect health pay the same rates as someone likely considered "uninsurable"? 

Campbell:  Not since healthcare reform passed…there used to be underwriting and it was good for the healthy and not so good for the unhealthy.  ACA (Affordable Care Act) was a great bill for the unhealthy.  This trend was a large part of why the rates were already historically higher here in NJ, we in the small group market moved to a no underwriting environment before ACA.  It’s hard to price accurately when you don’t know if the insured individual is a marathon runner or has end stage renal disease.  Some group products will ask for medical questionnaires, and will issue pricing based on the outcome…and most cases over 50 lives will have some blend of claims experience driving the rates.

Kuderna:  Why were NJ rates higher already?

Campbell:  NJ passed the Small Employer Health Benefits (SEH) program in 1994, making it so there were no longer any Pre-Existing conditions for group customers when they signed up as a group and kept consistent coverage.  There are products that do underwrite, ultimately the carrier must offer you a the product, but they can price it so high based on your underwriting that you won’t take it.  Carriers can do this because they are self-funded health plans and not traditional small group programs.  Each state has a different rule regarding these products.  For instance, NY won’t allow for these products below 100 lives.  Cases above 50 lives in NJ and 100 in NY have some component of underwriting, whether it is demographically based, actual medical questionnaires, based on 2 years of claims history, etc.  There are many different formulas that the carriers use, and they all make sure to price the plans in a way where they can cover the risk and make a small profit.

Kuderna:  Any tips for how someone can coordinate health insurance with their overall financial plan?

Campbell:  While you are young, spend the least amount of money you can on health insurance, but have a mechanism in place that prevents the catastrophic loss.  I think this holds true no matter what age you are at.  As long as you are comfortable financially to meet your Maximum Out of Pocket each year given a crazy out of the ordinary event, that’s what you should be balancing.

Kuderna:  Millennials are moving out later, getting married later, and starting families later, all the while trying to find the right career and escape overwhelming student loan debt.  What effect has this had on the health insurance market? 

Campbell:  I don’t think it has had an affect…the pool remains the same based on age and the people will stay on their parents plan as long as they can.  Before ACA, children could stay on their parents’ plan from 18-22 if they could certify they were a full-time college student.  Since ACA, they can stay on through Age 26.

Kuderna:  What's your favorite part about your job? 

Campbell:  I truly enjoy meeting new people, understanding what their problem is, and being the person who helps fix it.  I think the social aspect that leads me into being a true advisor to someone’s business operation makes this job challenging, fun, and ever changing.

Bryan Kuderna is a Certified Financial Planner™, Life Underwriter Training Council Fellow, and Investment Adviser Representative with Kuderna Financial Team. He is also the author of the best-seller "Millennial Millionaire."

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As the debate over repealing, replacing, repairing, or retaining Obamacare rages on, we focused in on what it’s like to advise such a controversial service…
Employers, Employees, Health, Insurance, Consumers
Saturday, 18 November 2017 02:06 PM
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