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Move Would Ease HMO Mandates
The goal is to give HMOs flexibility to fashion and customize a benefit package to exactly what an employer wants and needs light of escalating health premiums and, more importantly, at a price they can afford.
By allowing HMOs to better customize the benefit package written into a health-plan contract that’s free of benefit mandates, Hardiman and supporters of the bill believe they can keep more people covered, help employers continue benefits and better afford coverage, and perhaps even bring back into the market those companies that have dropped employee health benefits because of rising costs.
“We are saying, ‘There needs to be some options,’” said Hardiman, R-Kentwood. “It can make the difference for a lot of people from having coverage or no coverage.”
Under the state’s Insurance Code, HMOs are now required to write an array of benefits into a health plan, including inpatient hospitalization, primary care, diagnostic services, outpatient and therapeutic care, and 20 outpatient visits for mental health care.
Hardiman’s legislation, introduced April 20, would remove the benefit mandates, define and assure that HMOs provide “preventive” health services, and require that they still offer a comprehensive benefit package for employers who want it.
“They can work with an employer on what is really desired,” Hardiman said.If HMOs can get out from under the imposition of benefit mandates, they could offer products with more modest benefit packages at premiums that are “at least” 10 percent less than they are now, said Rick Murdock, executive director of the Michigan Association of Health Plans.
In West Michigan last year, the average premium for a one-person HMO plan was $237 a month per employee, according to the 2003 employer health-care cost survey conducted by the Alliance for Health and The Employers’ Association. A two-person HMO plan cost an average of $527 per month and a family plan carried an average monthly premium of $620.
In 1999, the year before health premiums began rising at double-digit rates annually, a one-person HMO contract cost an average of $162 a month. The monthly premium for a two-person plan was $354 and a family plan was $408 a month, according to the annual Alliance for Health/ Employers’ Association cost survey.
The Association of Health Plans, which represents 27 HMOs in Michigan that collectively cover 2.2 million people, has been pushing for changes in the state law to allow more flexibility in tailoring benefit packages to employers’ demands.
If passed, the bill would allow HMOs to respond to market demands for a low-cost option and to essentially offer an a la carte product configuration from which employers could select what they want to buy, and pass on the medical service they neither want nor need covered, Murdock said.
“It becomes more of a menu-driven type of package,” he said. “This just opens up completely what it permissible.”
The double-digit annual premium increases in health coverage of recent years has begun to drive demand for HMOs to sell plans with modest benefit packages that small employers can better afford, said David Bilardello, director of group underwriting for Priority Health, the Grand Rapids-based managed-care company that has more than 355,000 subscribers in western Michigan.
Bilardello said “nearly all” group employers make annual adjustments to their health plans to mitigate premium increases and are now voicing interest in plans that would allow them to choose the kinds of medical services they want covered, rather than go with the mandated package. He sees the demand only growing in the future for the kind of comparatively low-cost, managed-care plan the legislation would enable HMOs to create.
“A lot of our customers are interested in anything they can do to save money,” Bilardello said. “Every year health-care costs continue to be higher and continue to increase; that’s going to be a growing market.”
Hardiman’s bill has the backing of key legislative leaders who can move it along. It was referred to the Senate Health Policy Committee, chaired by Sen. Beverly Hammerstrom, R-Temprance, who’s a co-sponsor. Another co-sponsor is Senate Majority Leader Ken Sikkema, R-Grandville. Also among the sponsors is Sen. Patricia Birkholz, R-Saugatuck, and Sen. Wayne Kuipers, R-Holland.
The bill comes at a time when one business group in the state — the Small Business Association of Michigan — has been shopping around for legislative support to ease benefit mandates on commercial insurance carriers.
SBAM’s goal is to secure changes in state law so commercial carriers can write a bare-bones policy costing $400 to $600 month, vs. “Cadillac” policies that today cost upwards of $1,200 a month per employee, said Scott Lyons, SBAM’s vice president of small business insurance services.
“This is all about trying to find a way to roll back costs. It’s about finding ways to control costs so people can be covered,” Lyons said. “We tell them (commercial carriers) what they have to cover and what they have to cover dictates what it’s going to cost customers. There’s something wrong with that.”