Employee Health Plans: Life Doesn’t Offer Solutions, Only Trade-Offs
By John Butler
HR administration systems for health care (as well as other benefits) are constantly improving due to technology advancing at the speed of light. But when it comes to specifically managing business healthcare HR Leaders are used to having their company own the healthcare contract, and providing choices for their employees within these models.
Whether your company has a traditional fully-insured contract or a self-insured contract design, your systems are set up to electronically connect to every health insurance provider and TPA around the country. Under these traditional systems, you can do almost anything and everything at the click of a button. Onboarding and offboarding is easy and enrollments are almost seamless. Confirmations of coverage are emailed to the new employees with cards and welcome packets automatically going out in the mail. These systems make any HR Leader feel confident and secure that their new employees are connected to their new insurance providers quickly and efficiently. Employer-owned healthcare contracts have been around for decades, and HR Leaders would naturally feel reluctant to change any of these admin systems for fear of upsetting the cart, and making employees unhappy about the onboarding process and diminishing their overall healthcare/benefits packages.
Yet, no matter how smoothly these systems may run, the end result is that the health plans continue to deliver higher premiums, with higher deductibles and out-of-pocket costs each year, leaving employees (and certainly the employers) saying to themselves over and over, “why do we have this coverage again?
Here is where the big solution/trade-off comparison begins. If your company would choose to “break away” from having a company-owned healthcare contract, all of the auto-administration niceties get shifted to an entirely new system of onboarding and offboarding employees for healthcare coverage. Would allowing employees to apply for and own their own coverage really be worth the trouble for an HR Leader? If it was just up to me, and I was an HR Leader, I would not want to mess up my day-to-day systems, unless this was a very worthwhile endeavor.
Our latest analysis compared a 140-employee company’s plan with this new “Cafeteria Plan” design, and it took their almost $1,900,000 annual spend down to just under $1,100,000 in their first year. It changed the employer contribution from paying 75% of employees’ premiums to paying 100% of employee premiums. Oh, and it also reduced the annual employer spend by a quarter of a million dollars in the first year. This also gave the company a set budget with their healthcare coverage for the first time in almost 30 years.
Under the new Cafeteria Plan design, TPAs around the country have stepped up (along with individual insurance vendors) to assist with reimbursements and enrollments through their own high-tech systems, and even provide dashboards for HR with tracking and communications to all employees.
List billing is also here for Cafeteria Plans, with TPA’s sending all premiums along to the carriers, allowing HR Professionals the same payroll deductions they have been used to on their traditional “employer-owned” group plans. It’s certainly not perfect, but as with any new solution in the marketplace, it comes with different trade-offs.
Run the numbers and get your own online demo to see how these new administration systems work.
You can decide after that, whether you think this new solution and new administration system would be worth exploring for you and your firm before your next renewal.