Consumer Health Plans Lag PPOs, Surveys Reveal

September 17, 2007
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GRAND RAPIDS — Preferred provider organizations and Section 125 plans continue to be common health care benefit offerings in West Michigan, according to a recent survey by the Alliance for Health and The Employers’ Association.

Costs continue to march north, with employers reporting the average cost for all plans at $329 for one employee in 2007, up from $240 in 2002, an increase of 37 percent over five years.

A 2007 Michigan Chamber of Commerce survey of 398 Michigan employers showed that 50 percent of them have seen annual health care cost increases of 11 percent to 20 percent over the past three years. Some 88 percent agreed that the cost of health care premiums has gone up faster than wages.

Average Monthly Plan
Cost Per Person

Traditional Indemnity Plans
HMO Plans
PPO Plans
POS Plans
Self-Funded Plans
HSA & HRA Plans
All Plans

Source: Alliance for Health/Employers’ Association 2007 Health Care Cost Survey



$385
$335
$321
$369
$317
$267
$329



Maggie McPhee, director of information resources for The Employers’ Association, said employers have been reporting premium price hikes of around 5 percent to 8 percent this year. “It’s not even close to the double digits we were having a while ago,” she said.

Plans that incorporate health savings, health reimbursement and medical savings accounts are increasing slowly, McPhee reported. She said that in her frequent meetings on human resources issues, employers are reporting that those types of plans don’t seem to be reducing costs, but are at least holding them steady.

The Alliance/Employers’ Association survey of 233 West Michigan firms, most of them with 100 or fewer employees, showed that 10 percent of respondents offer HRA plans, 15 percent offer HSA plans, and just 1 percent offer a plan that includes a medical savings account. The average monthly cost for a single employee for HRA/HSA plans was $267, compared to $321 for the PPO average.

“What I’ve heard thus far, it’s not really saving them all that much money,” McPhee said. “It’s not like it’s a bad plan; it’s just not saving the amount of money they thought it was going to.”

“I’ve seen a lot of interest, but not a lot of movement” to the high deductible plans, said Michael Burdo, benefits broker for Pinnacle Insurance Partners and legislative chair for the Michigan Association of Underwriters. Burdo said Michigan’s heritage of rich benefits, thanks to its unionized history, has postponed the advent of plans with big financial expectations from workers.

The Chamber survey showed that 61 percent of survey participants have employees enrolled in a PPO, 22 percent in a health maintenance organization, 7 percent in an HRA or HSA plan, and even fewer — 6 percent — in traditional insurance. Locally, the Alliance for Health/Employers’ Association study showed that 40 percent of businesses surveyed have at least 75 percent of employees in PPO plans, 31 percent in HMOs and 32 percent in self-insurance plans. Thirteen percent of the companies reported that at least 75 percent of employees were in an HRA and 4 percent in an HSA.

But Joe Ross, the partner at Communications & Research in Lansing who conducted the study, said employers will continue to shift costs — and responsibility — toward consumers.

“Literally 34 percent of employers are considering just going to HSAs or using HSAs to supplement what they are already doing,” said Joe Ross, partner at Communications & Research in Lansing, who conducted the study. “It showed that 60 percent of employers in the next few years are going to start some form of wellness program. We offer a carrot — we do offer incentives. I see more carrots being offered in health insurance. The next phase is we’re going to start seeing the stick, in the near future.”

Mc Phee agreed that wellness programs are a popular topic: “Everybody is talking about wellness these days, more than they are talking about pay — how to deal with it, how to get people involved, how to get it to make a difference. With wellness, you won’t see the effects for three to five years. It’s kind of a gamble, but hopefully a good one.”

The Michigan Chamber survey showed that in an effort to stall the cost of premiums, 69 percent of employers are moving to plans with higher deductible and co-pays, and 67 percent are asking workers to pay a larger portion of premiums. Seventy-six percent said they ask employees to cover part of the premium, with the median proportion at 15 percent of the cost.

The Alliance/Employers’ Association survey also revealed:

  • Fifty-two percent offer one health care plan, compared to 60 percent in 2004; 40 percent offer two or three plans, compared to 35 percent in 2004.

  • Ninety percent offer cash payments to employees who waive health insurance benefits, compared to 55 percent in 2004.

  • Twenty-six percent have part-time employees eligible for benefits, compared to 60 percent of respondents to the 2004 survey.

The full results are available for purchase at www.afh.org.    

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