11 October 2010

What's Happening to your Health Plan

The Wall Street Journal

It's open-enrollment season, the annual rite of fall when health-care costs hit home for most people.

Companies typically allow employees to elect their benefit packages once a year. Making this season especially tricky: the health-care overhaul, which is leading to confusion—and sticker shock—for many employers and workers alike.

For the first time in years, your benefits could well be getting more lavish—but they could cost more, too.

Companies are scrambling to comply with early provisions of the Patient Protection and Affordable Care Act, such as a requirement that plans cover dependent children up to the age of 26. Many employees will be able to count on their companies paying all their bills for preventative care, and plans must eliminate lifetime limits on coverage.

But some companies, citing the new mandates, say costs are rising too fast: In a survey of more than 1,000 employers, Mercer, a human-resources consulting firm, found that corporate health-care costs would rise by 10% next year if firms made no changes to their plans. Many are finding that they have little choice but to switch a greater share of costs to employees.

Last year, when the outcome of the health-care overhaul was still uncertain, some employers held off on making any significant alterations in their plans. That is one of the reasons the number of changes this year is so great, says Tom Richards, senior vice president for U.S. products at health insurer Cigna Corp.

Some of these benefit expansions might not affect you. Dozens of companies, including McDonald's Corp. and Jack in the Box Inc., have been granted waivers by regulators from the new cap on annual payments. And many retirees are discovering that the new mandates don't apply to their plans

But those exceptions are small, and many employees are seeing new benefits and rising prices in the wake of the overhaul this fall.

Take Cathie Swem, 57 years old, of Jacksonville Beach, Fla. Her employer, Integrated Community Oncology Network, which runs cancer centers in Florida, changed insurers on Oct. 1 and raised the price of her coverage by about $65 per twice-monthly paycheck. The company also reduced the number of plans it offers from four to three, and implemented a slate of newly required benefits, including preventative services and dependent coverage of adult children.

Ms. Swem decided to switch to a high-deductible plan to save money. After making the change, she is spending just $8.22 more per paycheck—but now must contend with a $2,500 deductible, up from $250 with her traditional PPO plan, which offers a higher level of coverage.

She says she is happy to take advantage of the free preventative care. But since she is relatively healthy, she has trouble seeing the benefit of the other new benefits.

"All those things sound great, but if they don't affect you it's not as important as the cost," says Ms. Swem, who, as a billing specialist, deals with medical bills every day.

Mercer says the new benefits from the health overhaul add about 4% to premiums. The Obama administration says any impact on premiums will be minimal and in any event mitigated by provisions in the new law.

"Over the past decade, premiums for Americans who get their insurance at work have more than doubled," says Jessica Santillo, a spokeswoman at the Department of Health and Human Services. "The Affordable Care Act offers new benefits like preventive care with no out-of-pocket cost and tools to help fight unreasonable premium increases that will save money for consumers."

No one is sure how the changes will play out. But in the meantime, here is a look at what you can expect to see this open-enrollment season—and what you need to know about it.

One of the first things to ask is whether your plan is "grandfathered." The health-care overhaul stipulates that plans that remain substantially the same, with very few changes from last year, can avoid some of the new requirements.

Iroquois Title Co., a six-person firm in Watseka, Ill., faced a 20% price increase on its policy for next year. President Wayne Lehmann decided to swallow the increase and not make any changes to avoid having to cover things such as preventative services, which he worried would be too costly.

Mr. Lehmann said his employees were relieved not to have to pay more. One of them, Jeanette Reifel, 64, of Milford, Ill., says she told Mr. Lehmann "you made my day" when he delivered the news. "I'd been worried about changes to the plan," she says. "I need my paycheck."

About 50% of companies, though, are choosing to forgo grandfathered status, according to the Mercer survey. Costs are rising too fast, they say, and making changes to their current health plans is the only way to keep premiums lower.

Even grandfathered plans are required to offer certain newly mandated benefits. They must cover children with pre-existing health conditions and dependents up to the age of 26, and eliminate lifetime limits on coverage.
Dependent Coverage

The new dependent-children mandate could be a bonus for families like the Elkers, of Warminster, Pa. When Paul Jr. and Trish Elker's son Paul III, 23, graduated from college last December, Mr. Elker's corporate plan no longer covered his son.

The family bought Paul III an individual policy through online broker eHealthInsurance.com for $126 a month—and just in time. Paul broke his nose a few weeks later, requiring $28,000 worth of medical care.

The Elkers are eagerly awaiting the ability to re-enroll Paul III on his father's company's plan, for which they will pay no additional premiums. The open-enrollment period doesn't take place until early next year, though, says Ms. Elker. In the meantime, it is difficult to come up with the extra money to pay for Paul's coverage.

Employees should be aware of the rules governing who qualifies for the adult-child coverage, says Randy Abbott, a senior consultant at Towers Watson & Co., a benefits consulting firm. Adult children can be covered regardless of whether they live with their parents, are financially dependent on them or still go to school. But if that adult child gets married or has a child, the plan doesn't have to cover those dependents.

Think twice before you twist the truth to get an unqualified dependent coverage: Plans are increasingly conducting dependent audits. Benefitfocus Inc., a firm that provides open-enrollment software to more than 300,000 companies, said it has seen a 41% increase in customers requesting that it verify dependents' eligibility for next year. Penalties vary by state, says Benefitfocus, and include rescinding the policy and repaying the employer for claims.
New Benefits

Plans will have to cover preventative services at no cost to members. So employees who may have put off testing and preventive care in the past should be aware of what services they can now get free. This includes colonoscopies, cholesterol and blood-pressure tests, as well as adult vaccines. For children, vaccines, developmental screening and lead tests all should be covered.

What isn't covered? Prenatal screening is still being evaluated, and guidelines are expected to be issued next summer.

Beginning in 2014, your plan also will have to eliminate so-called lifetime limits on what it will pay out for your care. This can be important in the case of a long-term illness that results in numerous surgeries or hospital stays, for example. Leviton Manufacturing Co., a Melville, N.Y., manufacturer of electrical wiring with 2,700 workers, had a $5 million lifetime limit that it eliminated for 2011, for example.

Annual limits on coverage still will be permitted, though. In the coming year, plans will be allowed to set annual limits no lower than $750,000. On Sept. 23, 2011, that threshold moves to $1.25 million, and to $2 million a year later, as they gradually phase out.
'Cost Shifting'

Employers already are passing on a bigger share of their health-care costs to employees than they have over the previous decade, according to data from the Kaiser Family Foundation. The Menlo Park, Calif.-based nonprofit found this year that family premiums for firms went up 3% in 2010, but workers' share of those costs rose 14%.

This so-called cost-shifting trend appears to be intensifying. When Zurich Insurance Services Inc., a property and casualty firm in Jacksonville, Fla., conducted its open enrollment last month, it asked employees to pay 10% of their premiums for the first time. The company always has paid 100%, but "we reached the breaking point," says Ryan Schwartz, senior vice president of corporate affairs, citing higher costs generated by the new health-law provisions.

Tinsley English, a 33-year-old business analyst at Zurich, covers her husband and daughter through the company's plan, and says her premiums will be about $75 each twice-monthly pay period in 2011, up about 18% from this year. Still, she is grateful to have coverage and anticipates using the new free preventative services to take her daughter for doctor visits. She previously had to fork over a $20 co-pay for such visits.

"With a two-year-old, every penny counts," Ms. English says.

There isn't much that you can do about cost shifting, but you can cut costs in other ways. Helen Darling, who runs an employer coalition called the National Business Group on Health, advises employees to take advantage of the cost calculators on insurers and employers' websites to figure out how rich a plan they really need. "Most people are going to be better off taking less out of their paycheck," she says, than having gold-plated coverage.
Other Cost-Saving Tactics

Cost shifting isn't the only way employers are looking to curb the costs of their health plans.

BB&T Corp., a bank with 32,500 employees in Winston-Salem, N.C., is instituting mandatory mail order for prescription drugs starting next year. Steve Reeder, who runs benefits there, said he hopes to save 30 cents per employee each month by doing this. One reason to seek savings: Plan costs will go up 1% because of paying for preventative services, he says.

Another push is supplemental benefits. Mohawk Industries Inc., a flooring maker based in Calhoun, Ga., with 24,000 employees, is doubling the amount of critical-illness health insurance coverage employees can qualify for next year, from $10,000 to $20,000. (The company bought the voluntary benefit from insurer Unum Group.) That is in part to cover for employees who are facing higher deductibles in their traditional health plans: Mohawk is freezing new enrollment into its PPO plan and moving employees into two high-deductible plans next year and introducing health-savings accounts, in which employees can contribute tax-free to pay for medical expenses.

Finally, expect to be asked to work out and give your employer your body-mass index and cholesterol levels. Insurers say they are rolling out new wellness programs for employers this open-enrollment season that aim to reward employees who participate.

UnitedHealth Group Inc. is launching a personal rewards program that asks employees to keep a scorecard of their health in return for perks like discounted premiums or cash payouts. Humana Inc. is offering clients in some states a personal health allowance that reduces their co-payments if they take steps to improve their health.

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