Conference Examines Future of Health Benefits

May 13, 2008

Employer-sponsored health benefits went on trial at the April Employers Council on Flexible Compensation conference. The verdict, after three days of expert testimony, is that the jury is still out on what will happen.

The following are conference highlights:

Progressive employers are moving their focus from health benefit strategy to health strategy. What this means is a change of emphasis from traditional costs (e.g., claims and premiums) to factors like workforce productivity, reduction in absenteeism and a decrease in the overall “burden of illness” that affects employer and employee alike. This simply turns up the heat on the importance of offering a wellness program, especially one that has three main components: a health risk assessment, biometric screening and weight management.

The latest health statistics show significant increases in the number of unhealthy young workers who are overweight, obese and/or diabetic. Studies show that for the first time in the history of the United States, the current generation will have a lower life expectancy than the prior generation. The trend is such that employers can no longer assume that employees in their 20s will have fewer claims than employees, say, in their 50s.

Many more employers are considering a consumer-driven health care program, perhaps involving a health savings account (HSA) or a health reimbursement arrangement (HRA). Success is dependent on four factors:

• Communication (early and often)
• Senior leadership support and participation
• Meaningful employer contributions
• Linking financial incentives to behavioral change

More and more carriers are providing plan participants transparency data on the doctors and hospitals in their networks. The data typically analyzes cost and quality.

So far, studies show that the majority of companies with the highest HSA adoption rates have been large employers. For example, American Express used a three-year, phased-in approach to reach 50 percent participation in an HDHP-HSA plan.

ERISA and other legal risks exist for HRAs used to fund individual insurance premiums. In some states, this practice is prohibited. In other states, insurance commissioners view such funding as sufficient employer funding to trigger group market rules. There are things employers can do to mitigate the risks:

• Allow the HRA to reimburse all out-of-pocket medical expenses, not just individual premiums
• Outsource claim substantiation to a third-party administrator
• Make sure the individual insurance does not appear to be part of the employer’s benefit package
• Do not encourage employees to select any particular policy or carrier
• Do not negotiate rates or other terms and conditions of the individual policy on employees’ behalf
• Do not provide claim forms or other materials for the individual policy

We anticipate additional regulatory guidance on the following issues:

• Calculating COBRA premiums for various plans, including HRAs
• Grab bag guidance on various HSA questions
• Cafeteria Plan Regulations in final form
• HSA rollovers and contribution rules

Infinisource is always available to work with insurance agents to provide clients with innovative yet practical flexible benefit solutions. If your plans renew on the calendar year, now is a great time to plan ahead for 2009.