Use It/Lose It

Have I mentioned yet that I work in Human Resources for a small company on the west coast? Well, I do. And that includes overseeing the employee benefit package - which means, of course, the medical insurance plan. Like most small employers we've been watching our premiums climb and climb and climb over the past 10 years. We've tried all the cost control measures: converting to a Preferred Provider Plan, raising deductibles, increasing co-pays, decreasing coverage - all of which worked for very short periods of time. But the rates still increased 85% between 2001 and 2006. At renewal time in 2007, the projected annual premiums were going to be over $600,000 to cover 35 families - an average $17,142 per year per family. We actually had entry level employees whose health coverage was going to be higher than their annual earnings! It wasn't do-able.

So we switched companies, restructured the benefits, and signed on with a High Deductible Health Plan (HDHP) and a Health Reimbursement Account (HRA). The savings were substantial, enough for the company to fully fund the HRA for each employee and still leave operating funds for the business! It seems to have worked well - the employees have been relatively happy with new coverage (but have given me lots of blog material for the future), the expenses have been kept in line, and the paperwork has been manageable.

Now it's time for renewal. And guess what? The premiums will be increasing 20% for the upcoming year, because we fully funded the HRA rather than leaving our employees responsible for a portion of the deductible. As it's been explained to me, the insurance company has found that when deductibles are fully covered thru the HRA, the employees "over utilize the system". In other words, they make doctor's appointments and get health care! If the HRA is not fully funded and the employees have to come up with an additional $500 or $1000 per family, then they "tend to make better consumer decisions and utilize the system more appropriately." In other words, when they can't afford to pay the doctor bills, they tend not to make appointments.

But the thing is, we're not over-utilizing. The reports show that 75% of the employees had a medical claim in the last 9 months. 25% have not seen a doctor during that time. Of the 75%, 6 people had reached their annual deductible and maxed out their HRA. That worked out to 20% of the covered employees. So 80% did not fulfill the deductible. In addition, the HRA usage is running about 48% of projected expenditures, which is well below the 60% industry average. That's great for the company because we can keep 52% of the funds in the operating budget for next year. Except that now a portion of the savings will be sucked into the gigantic insurance vacuum when they raise our premiums. Again. Year after year after, there is only one winner and it's never the employer or the employees.

Although technically I'm not supposed to have access to employees medical information, I pretty much know what's going on with everyone because they tell me! I've helped them select in-network "providers", decipher insurance statements, file reimbursement claims, set up their internet passwords, send in the pharmacy-by-mail forms, and more. I know what's up with each person and I know how they're getting their health care. No one is using the ER inappropriately, no one is making appmts. just to get out of work for a few hours, no one is running to the MD for sniffles or dishpan hands. We have a couple of diabetics, some baby-boomers with the standard high cholesterol/bp problems, cancer survivors who need periodic checks, teen sports injuries, young moms and want-to-be-moms, etc. etc. etc. It's a boringly normal slice of middle-income Americans, who are now footing the bill for the true system abusers and for the insurance company shareholders. Providing health care for their own families is coming in a distant 3rd in the list of priorities.

So, my company won't be fully funding the HRA's in the next 12 month period, which will keep the insurance company happy and will keep our overall increase in the 5% range rather than 20%. The employees will have to factor another $500 to $1000 into their annual budget and "make better choices as health care consumers." When I meet with them in June to explain the decreased funding, the only thing I'll be able to say is "Don't use it and you won't lose it."