Maneuvering through the benefits maze

March 15, 2009
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Managing a company’s health insurance benefits can be a complicated job as multiple extenuating factors usually affect the makeup of next year’s final plan.

It can be even more problematic, though, when employees are working on separate contracts that start and end in different time periods that may fall under different economic circumstances. Under this scenario, estimates for cost and coverage can’t just be made one year at a time.

Kent County Human Resources Director Don Clack has to make these decisions years in advance because the county negotiates with 13 bargaining units on three-year contracts while not knowing exactly where tax revenues will be in two years. So the plan he put together that was enacted for this year also had to be extended into 2011 for the seven labor groups with which his office is currently negotiating.

“What’s being voted on by our bargaining units as we go through negotiations is a three-year plan, which kind of tiers up. So (the 2009 plan) is just a start. I have bargaining units that have those changes (for 2010 and 2011) in place,” he said.

“I like to maintain the same blend of designs for everybody, which is kind of a challenge with 13 bargaining units. But that’s what we’re working on.”

Changes made to the 2009 plan from last year included a co-pay increase for in-network preventative care. The co-pay for an office visit went from $10 to $20, urgent care rose from $10 to $30, and a visit to the emergency room increased from $50 to $100. Out-of-network visits are covered through deductibles and co-insurance.

“What we’re trying to do through education and the co-pays is get people to drive to the most cost-effective treatment. That’s the goal. But, obviously, if it’s an emergency situation, you go to the ER. Actually, in our plan, if somebody is admitted after they go to the ER, that $100 is waived,” said Clack.

The county plan added an in-network deductible this year and raised the out-of-network deductible. In-network is $200 per individual and $400 per family, while the out-of-network deductible for an individual rose from $250 to $400 and for a family from $500 to $800.

Prescription co-pays have also risen. Generic went from $10 to $15, formulary rose from $15 to $20, and non-formulary increased from $30 to $40.

“It’s a changing environment. Only until the last five to 10 years — and probably closer to five — have we actually seen the marketing of prescription drugs on network TV. It’s an unusual type of situation and it’s hard to manage the cost of that,” said Clack.

The county exercised a little bit of control in that area by removing erectile dysfunction drugs from its coverage. The 2009 plan also dropped a monthly payment “in lieu of health insurance” to an employee, if a spouse was covered by a county plan. Clack said the payment didn’t amount to much, but was seen as being unnecessary because the employee receiving the payment would have insurance through the county anyway.

But the 2009 changes to the county plan didn’t only remove items from coverage. The new version added colonoscopy and standard adult immunizations as preventative benefits, increased benefits for contraceptives and voluntary sterilization, and lifted some limitations on partial lab tests. The employee portion for premiums didn’t change this year; it remained at 10 percent.

The county is expected to pay roughly $20 million this year for its group health insurance coverage, with the bulk of that money — about $14.7 million — to come from general operating funds. Kent has 2,052 employees and Clack said the county’s cost for coverage rose by 11 percent this year from last year, not necessarily a surprising increase.

“The trend rates are generally what they use for medical inflation, which generally are in an area from 9 to 13 or 14 percent over the years. These fluctuate a little bit but that’s kind of been the general trend,” he said.

Clack said when he meets with bargaining units to carve out new contracts, his ballpark figure for projecting future coverage costs is usually three to four times the inflation rate. A study done by the Kaiser Family Foundation last year compared the rise in health insurance costs to the Consumer Price Index and found that insurance prices rose more than three times the inflation rate over a 20-year period.

“We’ve had some flux. I think last year was kind of funny. Some thing went way up and some things hadn’t. But on average, you do see about three to four times the rate,” he said.

In 2004, the county decided to self-fund its health care benefits and chose The Principal as its third-party administrator then. But the county went with Blue Cross and Blue Shield as its administrator this year. After requesting proposals last year, Blue Cross offered the county the largest provider discounts.

“I’m pretty much a proponent of every three to five years taking some type of look at your administrator. It’s a big change to switch over so you don’t do it kind of willy-nilly, but you should look at it every three to five years unless there are issues that would drive you to make it sooner,” said Clack.

The county, though, still offers employees optional coverage through an insured HMO contract at Grand Valley Health Plan.

“The combination of adding the deductible, adding the coinsurance and the discount structure, we believe we will probably flatten out our costs this year,” said Clack.

“And that depends on how our experience is. If we have fewer claims, then we’ll do better. If we have higher claims that we traditionally have had, then it won’t be as good. When you’re self-funded, that’s a little harder to predict.”

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