Benefits Business

The uneasy open enrollment period

Studies of health care system highlight reasons for malaise of employers and employees

By Len Strazewski

November may be the cruelest month for agents who also manage employee benefits plans for their commercial clients, but these days it’s just the beginning of administrative gripes and customer complaints. Get ready for them—because there’s not much any agent can do to eliminate them.

For most employers, open enrollment begins in November and extends through December, providing opportunities for employees to join or change health plans, specify their Flexible Spending Account (FSA) contributions and purchase elective benefits such as long term care insurance, critical illness protection and other coverages paid through payroll deduction.

When open enrollments ends, you may be ready to relax and catch your breath, but don’t expect the peace to last very long. Agents can expect a steady stream of complaints in 2008, driven by increasing benefits costs for both employers and employees and by plan design failures.

In mid-September, a CBS News Poll of 706 adults nationwide indicated that 42% of Americans were very dissatisfied with the quality of health care in the United States, and an additional 24% were somewhat dissatisfied. Cost will continue to be the big issue for your clients and their employees. The poll indicated that 58% of Americans were very dissatisfied with the cost of health care and an additional 23% were somewhat dissatisfied.

There are plenty of reasons to be dissatisfied, according to industry watchdogs.

According to a recent study by employee benefits consulting company Towers Perrin, corporate health care costs are expected to increase 7% to an average of $9,312 per employee in 2008.

The study, based on data from 300 major employers, represents more than 6 million employee benefit plan participants.

Employers are not the only ones affected by price increases. Employee contributions to health care premiums are expected to jump 8% (or about $156 per employee), which, incidentally, is more than twice the average annual merit pay increase.

In addition to higher premiums, plan participants can expect copays of $20 per regular doctor office visit and $30 for specialist office visits. Under health plans with coinsurance, participants will pay about 35% of the cost of each office visit. Plan participants will also experience increases in their prescription drug costs in 2008, with an average copay of $10 for generic drugs and $25 for brand name drugs.

As a result of increases like this over the past five years, plan participants have seen their out-of-pocket costs double during that period, according to Towers Perrin.

Plan participants are noticing the costs, the study indicates, and some lower-paid employees are being driven out of the plans completely.

“Increasing contributions, deductibles, copays and premiums are causing many workers to opt out of their employers’ health plans, forcing significant numbers of employees to join the ranks of the uninsured,” notes Dave Gillette, managing director of Towers Perrin’s health and welfare practice.

For example, he says, about 20% of service industry employees opt out of their employers’ health plans.

Plan design problems

Costs, however, are not the only concern. Have you looked at the plan designs recently offered by the health plans you represent? Health care costs would be even higher without stringent managed care provisions, but every managed care activity creates another source of complaints whenever employees begin to access the health care system and their benefits.

The Commonwealth Fund in New York is a private foundation that aims to promote a high-performing health care system that achieves better access, improved quality and greater efficiency in health plans. In September the organization released a study identifying weaknesses in the payment structures of existing health plan designs and listed a series of areas for reform. Each plan weakness points to a source of problems and complaints.

According to the Commonwealth Fund, current payment systems create penalties and disincentives across all elements of health care, including illness prevention, diagnosis, treatment of conditions and follow-up care. Specifically, the study identified nine problems with health care plan delivery and payment systems that don’t support healthier plan participants or quality care:

• Current fee-for-service systems do not pay adequately (or at all) for many elements of preventive care.

• Payors often do not have incentives to invest in preventive care because the payoff in better health and lower costs occurs in the distant future.

• Fee-for-service systems may not pay adequately for the time needed by a provider to make an accurate diagnosis, develop an appropriate care plan and discuss it with the patient.

• Payment systems reward providers for supplying more services, even if those services are unnecessary or of low quality.

• In most payment systems, providers are paid more for patients who experience adverse events, particularly serious adverse events with multiple complications.

• Payments systems reinforce fragmentation of care by paying multiple providers for multiple services or tests regardless of whether the care is coordinated or duplicative.

• Current payment systems generally do not pay hospitals or physicians to manage the needs of patients with complex conditions after discharge from the hospital, or to encourage or assist patients with post-discharge instructions to improve outcomes or prevent rehospitalizations.

• Patients generally do not have financial incentives to adhere to prevention and disease management programs designed to improve outcomes and reduce health care costs.

• Many health plans do not have mechanisms for encouraging or directing patients to providers who supply better value, that is, lower cost for care of the same or higher quality.

When health plan reforms or managed care provisions address some of these problems, they may pose additional problems, including employees who resent being directed to network physicians who comply with cost and quality standards, intrusive wellness or disease manage-ment programs, and restrictions on care that may be duplicative according to plan standards.

Group health plans aren’t the only source of complaints. Every year, for example, you can count on a few employees to miss the deadline for declaring FSA contributions and want in when it’s too late. Or, after choosing the Preferred Provider Organization plan (PPO) without checking the list of network providers, the employee discovers that his or her family physician or local hospital is out of network.

As a result, employees begin to appeal charges or ask to change plans long after open enrollment has closed.

Elective benefits can be a lucrative sideline to employee benefits sales, but they also create another area of problems. These problems can include failed enrollments—signups missed by the provider—payroll deduction errors, leading to too much or too little taken from paychecks, and the occasional disappointment of employees who did not understand or who overestimated the value of their elected benefits.

So enjoy November, despite the rush of open enrollment. It’s all just going to get worse. *