Overall PPO costs jump 9.5 percent in area

June 21, 2009
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Overall costs for employers and employees for Preferred Provider Organization-style health benefits jumped 9.5 percent for 2009, higher than for Health Maintenance Organizations and Consumer Driven Health Plans, according to a recent survey.

Benefits consultant McGraw Wentworth surveyed 100 organizations that employ between 100 and 10,000 people in Kent, Ingham, Jackson and Kalamazoo counties. It hired actuarial experts to determine the Total Cost Ratio for the various plan types.

The TCR for PPO plans was slightly higher for West Michigan than for Southeast Michigan — $536 versus $532 for single coverage. West Michigan employers bore 65 percent of those costs, compared to 59 percent in Southeast Michigan.

PPOs carried a higher TCR than HMOs and CDHPs, which logged in at $436 and $506, respectively.

McGraw Wentworth's 2009 West Michigan Mid-Market Group Benefit Survey also showed that costs, after benefit design changes, are increasing at an average rate of 5 percent in West Michigan, compared to 6.4 percent projected nationally.

Since 2004, McGraw Wentworth, with offices in Troy and Grand Rapids, has conducted the survey in southeastern Michigan. Last year, it expanded the survey to include employers of 100 to 10,000 people in the four outstate counties. Some 29 percent of participants are located in Kent County; 17 percent, Ingham County; 11 percent, Jackson County; and 8 percent, Kalamazoo County. Of those surveyed, 36 percent have at least some unionized workers, and 19 percent are auto suppliers.

The survey has a 9.1 percent margin of error.

Mid-size organizations in West Michigan are embracing consumer-driven health plans and other measures to trim the perennially rising cost of health coverage premiums, according to the survey.

Those plans, which range from simply high deductibles to combinations that include Health Savings Accounts, have enticed 33 percent of those surveyed.

"Some of the carriers are offering plans that have a high deductible by definition, but might be wrapping it with HRA (Health Reimbursement Account) dollars," added Roger Edgren, West Michigan account director for McGraw Wentworth.

"From the employees' perspective, it may look similar to what they had previously. … It is by definition a CDHP. It could save money, depending on where underlying insuring is priced," Edgren said.

Among the survey's other findings:

Almost half of the employers had conducted an eligibility audit over the previous two years, discovering that an average of between 1 percent and 5 percent of dependents failed to meet eligibility requirements. Edgren said such audits are part of a trend to more tightly manage benefits plans. He said three-quarters of those who have done an eligibility audit have undertaken the task internally while the rest hired experts. Savings can be as much as $2,500 to $3,500 per non-eligible dependent, he added. Often non-eligible dependents are left on the rolls by neglect or mistake rather than fraud, he added.

Some 9 percent require smokers to pay more compared to 6 percent nationally. Edgren said tobacco use is easier to test, making smokers a more likely target for extra charges than overeaters or alcohol users.

In West Michigan, employers are more likely to embrace wellness strategies such as health risk appraisals, asking for health-related tests and goal-achievement incentives.

While just 15 percent of employers nationally pay workers a stipend for forgoing health benefits, in West Michigan that figure is 59 percent. Typically, that amounts to $100 per month, Edgren said.

This was the first time that McGraw Wentworth identified "TrendBenders" in West Michigan — companies whose aggressive benefits strategies kept cost increases to 3 percent or below. These very cost-conscious organizations use practices such as: surcharges or restrictions on spousal coverage; requiring documentation of dependents for new enrollees; utilizing a three-tier co-pay system for prescription drugs; and smoker surcharges.

Southeast Michigan employers were even more aggressive in embracing cost-saving strategies, Edgren add, "for reasons that might be obvious."

West Michigan spectrum of total cost, single coverage

PPO
CDHP
HMO
$536
$506
$436
65% employer 35% employee
68% employer 32% employee
63% employer 37% employee

Source: McGraw Wentworth 2009 West Michigan Mid-Market Group Benefits Survey

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