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Subscribe to RSSFor some American workers, picking the right health insurance is becoming more like hunting for the perfect business suit: It takes some shopping around to find a good fit and avoid sticker shock.
In a major shift in employer-sponsored health insurance coverage, companies such as Sears Holdings Corp. and Darden Restaurants Inc. are giving employees a fixed amount of money and allowing them to choose their own coverage based on their individual needs.
The approach, called defined contribution health insurance, contrasts to the decades-old practice by most U.S. employers of offering workers a one-size-fits-all plan with benefits they may not want. It also means American workers who have grown accustomed to having their benefits chosen for them could wind up with bigger bills and inadequate coverage if they don’t choose wisely.
“It’s a big, big change in the nature of what it means to have health insurance,” says David Cutler, a Harvard University economist.
Until now, defined contribution health insurance plans have been largely limited to small businesses and retirees. But more employers are considering them as a way to control their rising health care costs. After all, the average annual premium — or cost for insurance coverage — for an employer-sponsored family health plan has almost doubled in the past decade to nearly $16,000, according to the nonprofit Kaiser Family Foundation. And companies generally foot at least 70 percent of that bill.
But now the plans are catching on. Benefits consultant Mercer found that 45 percent of the 2,809 employers it surveyed earlier this year are either using or are considering a defined contribution approach.
As a result, insurers and benefits companies are rolling out online exchanges where workers can buy insurance coverage roughly similar to how they buy plane tickets on travel websites. The private sites are similar to the public online exchanges that will enable people to buy insurance starting late next year as part of President Barack Obama’s health care overhaul.
Aon Hewitt, a benefits consulting giant, expects 200,000 people to enroll this fall in coverage offered through its online exchange. Darden, which operates the Red Lobster and Olive Garden chains, and Sears are offering their defined contribution plans through Aon’s exchange site.
WellPoint Inc., the nation’s second-largest health insurer that runs Blue Cross Blue Shield plans in several states, plans to debut its exchange next year. The insurer has an ownership stake in Bloom Health, a Minnesota company that expects the number of people covered by plans through its exchange to more than triple to about 100,000 people next year.
MORE CHOICES
Defined contribution health programs can differ greatly from the typical coverage offered by U.S. employers. Most coverage that companies currently offer gives employees the option of one plan or maybe two.
With defined contribution plans, the company gives the employee a set contribution toward coverage, and the worker then picks the plan. That may involve choosing from among a few plans the employer offers or using an exchange to sort through dozens of choices offered by several insurers.
The employer’s contribution may cover the entire premium or a smaller slice of it, depending on the coverage that the worker choses. A young, healthy, single worker, for instance, may pick a plan that balances a smaller premium with a higher deductible, which is the annual out-of-pocket amount a patient pays before most of his or her coverage kicks in.
The plans are an attractive option for companies that want more predictable health care costs or more choices for their workers.
Neither Sears nor Darden would say how much they’re planning to give employees so that they can buy health insurance. Sears said 90,000 of its employees will be eligible for its new approach, and they will have 15 choices for health insurance instead of about four.
Darden, which has 45,000 full-time employees, said its workers will be able to go online and pick from five medical plans, four dental plans and three that provide vision coverage. The Orlando, Fla., company had previously just offered one health insurance plan.
The company said that the sum Darden will give workers to cover costs for their insurance will rise as health care costs climb. Ultimately, it said workers will have about the same out-of-pocket costs that they currently have for about the same level of coverage — but they’ll have more flexibility.
“One of the things (employees) asked for was more choice in their health care,” says Ron DeFeo, a spokesman for Darden. “As we looked for a way to do it, this was the best option.”
The plans can be a good option for smaller businesses as well. Dick Bernstein owns Security Auto Loans Inc., a New Hope, Minn., subprime auto loan provider with about 40 employees. He wanted to offer health insurance to attract and keep workers. But other small business owners warned him that premiums in more traditional plans could soar as high as 20 percent annually.
So in January, Bernstein began offering his employees a defined contribution plan through Bloom Health. Bernstein’s company gave each worker $3,000 and sent them to a secure website run by Bloom to pick a plan. On the site, workers are asked about 35 questions to pin down their health needs, financial situation and comfort with risk.
For example, the website offers a hypothetical scenario: A total of $1,500 in medical bills due in 60 days arrives. It then asks if the worker has the money to pay for it. The question is intended to determine whether a high-deductible plan would make sense for that employee.
Bernstein says the program is good for his business because he can contribute a fixed amount every year, making his costs predictable. Plus, Bernstein doesn’t have to devote staff to finding the right insurance plan to offer.
“That was another key point for me — I didn’t have to be part of this decision-making process,” he says. “I didn’t have to figure out what’s best for my employees.”
Heather Lockman, who works as a loan processor at Security Auto Loans, was skeptical at first about the new plan. But she changed her mind after she wound up with 20 different plans — eight pages of options — to choose from after she answered the questions on the Bloom website.
A TAILORED FIT
In the end, the 36-year-old picked a low-cost option that came with a $3,000 annual deductible. She chose maternity coverage but declined the mental health benefit. The $3,000 that Security Auto Loans gave her covered her annual premium, so Lockman will have few out-of-pocket expenses if she stays healthy.
“It gives me more control over my health coverage,” Lockman says. “It makes it fit my lifestyle.”
Proponents of the defined contribution approach say it forces people to pay more attention to details like costs, and that could force insurers to compete more on price and quality. That could ultimately lead to lower health care costs overall.
“In every consumer marketplace when you have real competition, prices go down, and we have seen those competitive juices flowing as we have gotten rates from participating insurers (for exchange business),” said Ken Sperling, Aon’s national health care exchange strategy leader.
But critics argue that such an approach can stick customers with bigger bills if the employer’s set contribution doesn’t rise over the years to match growing health insurance costs. And that could mean that employees would be forced to switch to cheaper plans that offer less coverage over time, says Cutler, the Harvard economist who advised the 2008 Obama campaign on health care.
“That’s a very big risk,” he says.
And workers may find educating themselves about health insurance daunting. “I think people are going to have to spend more time understanding their options,” says Paul Fronstin, an economist with the Employee Benefit Research Institute. “There are all kinds of dimensions of information you’ll be provided, potentially.”
Mark Pauly, a University of Pennsylvania health economist, agrees. He says there’s an “enormous amount of inertia” among consumers when it comes to shopping for the right insurance plan.
“Life’s too short to spend all your time worrying about health insurance,” he says.
Despite the possible downsides, insurers say defined contribution plans are becoming more common. WellPoint Chief Financial Officer Wayne DeVeydt says he expects interest in the plans to pick up in the coming years.
“Right now employers are really trying to understand what the health care landscape will look like,” he says.
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I am so stinking sick of small business owners. I wish they would all go straight to hell. They are glorified slave owner, greedy blood, letting rat bastards.
King rat bastard is the US Chamber of Commerce
without small business owners, losers like you would not have a job... maybe people like you should be allowed to starve?
you are so right brenda. I'm going to close up my small business and put my 12 employees out of work. That will put them in a much better situation. Your logic is sound. I will let Obama One Kenobi take care of them all.
Just so you know, big businesses don't start out as big businesses, they start out as small businesses. So basically if you don't like small businesses, you don't like big businesses either. Small businesses work, and plan, and innovate to become big businesses. That is how business works.
Just "saying it like it is!"
I will assume you eat, have a cell phone, a computer, etc. etc. etc. Point is, many things you may enjoy today can be attributed to small start up businesses that had a vision, businesses that hope to do well and grow. And of course, many don't.
Bruce-308647
Good post, Kallie, and I agree with you 100%. Healthcare and health insurance are two completely different things, and providing everyone with health insurance provides little incentive for providers to lower costs. It just creates another layer of "winners and losers". Take AARP. They supported healthcare reform, even though the VAST VAST majority of their members were against it and it cut benefits for seniors. Why did they endorse it? Because this "non profit" company stands to make over a BILLION dollars by selling gap insurance coverage to their members. Maybe the government should just run government sponsored clinics for those with no coverage, where charges are bases on ability to pay. We confused universal care with universal insurance, and in the process just created another mess to be dealt with in the future. (Today's problems are caused by yesterday's solutions!)
Umm have you ever tried to get health care with no health insurance? I have and i know from personal experience it is flat out impossible with the exception of the ER of course. Universal care is worthless without universal insurance since no doctor will not even talk to you unless you have health insurance. Our system is designed around having access to health care through for profit health insurance companies, how the hell can you not understand that fundamental problem? If you need to see one or more specialist doctors for a specific injury or health problem, just try to be seen by one, let alone actually get any medical care from one. Try to schedule a surgery for an injury you have suffered without health insurance, it is one thousand percent impossible.
Here's a thought. If the government can mandate health insurance for everyone...why can't the government mandate a healthy lifestyle for everyone?...especially for those that rely on the fruits of someone else's labor? if you agree...please sign the petition today!
That was not a question but a statement that I don't understand.
The article only talks about younger people getting cheaper insurance. How about the older workers getting stuck with high deductible plan because they won't be able afford the premiums on anything else.
US workers and retirees are increasingly totally on their own... and this is just the beginning. Medical bills are the quickest route to personal bankruptcy; sometimes the only protection is to leave the country, which is what we did.
People should be on their own....why is it governments and taxpayers job to support people who have failed through bad choices, laziness, and stupidity? If you get sick and cannot afford a doctor that is the breaks you get.... too bad. Life is not fair, and historically any government that tries to make life fair has failed and imploded. It is happening here and will destroy the USA in a hurry. The USA is a failing superpower whose best days are long gone.
Governments shouldn't need to worry about the people they govern. Why is it we want our government to help us? What a novel concept. Governments are there to tell people what to do, where to go, and spend their money on wars. Why would anyone want a government to help its people?
/sarcasm
There's a difference between being helped and being carried. There's a difference between governing adults and taking care of adults.
The only people who need to be told what to do, where to go and how to spend their money are people incapable to do for themselves. Those that mentally disabled are usually wards of the court/state and receive govt assistance.
Unless, of course, IMHO, you are insinuating that and should be wards of the state?
For every good the govt provides, comes a host of caveats, taxes and rules. Hence the more govt gives, the more it governs - and the less free its people really are.
Maybe people who cannot afford health care should not be having children they cannot afford to support without governmnet help? How about a law that says you cannot have children unless you can afford to pay all expenses related to them... schooling, helath care, etc? Maybe people should only get what they can afford? Perhaps it is a good thing that lazy and less intelligent people die young and then don't pollute the gene pool with less than successful genes? If people were forced to live within their means, hard working intelligent people would not have to be taxed to support a bunch of losers. I am tired of paying for other peoples stupidity and bad choices. Th ewelfare and handouts have created reverse evolution...survival of the worst, laziest, least productive genes. The future of this country is forever lost. It is downhill from here on out. What arude awakening so many will have. I for one am shutting down my business by 95% and moving into tax free bonds. Thanks Obamacare and Lazy Libtards for my early retirement!
Darwin said it all. Survival of the fittest. "The weak are meat, and oh how the strong do eat." You get sick, don't expect your society to help you. Just hurry up and die. And if you don't get sick, you don't need to help anyone else, they're just welfare queens anyway.
PS you just gotta ask yourself "What would Jesus do?"
/sarcasm
Amazing those who claim to be "science-based" and believe strongly in evolution, don't seem to understand it.
A people coddled from cradle to grave make easy pickin's for those eager to bring their demise.
Hi - As my policies play out screwing your lives up I would like to say goodnight and I will be golfing tomorrow.
“Life’s too short to spend all your time worrying about health insurance,” he says.
Life can be much shorter if you don't get the right insurance.
Indeed.
I find it ironic that the companies doing this to their employees are the same ones who sent letters to them prior to the election about if Obama is elected then they would have to cut jobs....
The Rule of Unintended Consequences is coming into play, OBamacare in the short term will cause a total upheaval in the health care system, which is what they wanted in the first place. Then we ALL get single payer coverage, with the same organization that is run by the Friendliest People in Government, the IRS. So Shut Up and Get Back in the Box, They know what's best for you. Ask'em !!
Some One Said Free Air , there is no Such thing , Because Home Oweners are Paying Open Land Tax to Produce Good Air
Free Nation is India , there are 1,241,491,960 People (2011 ), No Medical Insurance ,You can Visit any Doctor / Hospital ,You can Speak Any Language , You Can Practice any Religion
IF People are Economically Poor , Government will Pay for Major Surgeries Like Heart , .....
Billions are surviving without Insurance , why can't millions ?
Some One Said Free Air , No we are Paying for that too , that's called Open Land Tax where you Live
Free Nation is India , 1,241,491,960 People without Medical Insurance ,Still Surviving
If a perosn is Economically Poor and Needs Major Surgey , Government Will Pay
Billion + Surviving without Medical Insurance , why Not Millions + ?
In my Town where I live there are Two Grocesory Stores ,But You know how many Pharamacy Stores
1.CVS - 2 Stores
2.Walgreen
3.Eckerd Drugs
4.Shoprite Pharmacy
5.Walmart Pharmacy
6.Wald Drugs
7.StopandShop Pharmacy
This is the way it should be. Now those irresponsible employees will be forced to look after their own undisciplined lifestyles. They can no longer consume bad foods, snort all kinds of designer drugs and substances and then pass on the ill effects from different diseases to their peers to pay on Health Cares. It is not fair and will never be fair. Maybe the Federal Govt has a reason to classify Medical Marijuana as toxic. Nobody knows the ramification of this irresponsible Act. Just go ahead and inject all kinds of poisons into your body and then blame OBAMACARE when you get sick.
whatever... bottom line is you're screwed and they win... again. only single payer mandate can truly restore fairness.
Explain exactly how a single payer does that? Be specific.
Why is this even a headline? Everyone, except the oblamo administration told you this would happen. Enjoy your free government health care! ROTFLMAO!!!
Navyvet what makes you think that a Ryan style health voucher system is President Obamas fault? I do not see your point.
According to RACIST's or IGNORANT whites, we do have the perfect system called "the have and have not"...
These people are mad because they are not the only ones insured...
Myself personally, do not care abut health insurance...I am 50 years of age and have never been hospitalized for any reason...I do not have the problems or diseases that people or those who want to be like them have...
My solution is simple, I would rather die than to have some no-good-redneck attempt to diagnose me for me ny reason...
I have seen these people have all kinds of surgery because their internal body parts are rotten, and it makes you wonder what the hell are these people doing or eating to become so sick internally...
It is the perverted catholics who are suffering from all kinds of diseases in this country...and those who love them and want to be like them...
Anyone who watches American television and sympathize with these people will suffer the same fate...
The average person my age is physically sick...they are unhealthy, falling part for not taking care of their bodies...there is no such thing as healthy eating or foods...but you people will eat anything, just like you will @!$%# anything...so sad...
By the way, when I die, my body parts will not be used to keep some racist catholic pervert alive...
You sure are angry. Name calling and tantrums like this will only make your days miserable. Bitterness will rot your bones as fast any carcinogen.
Chill.
I have never had any kind of insurance except the kind where I chose it, and I paid for it. My husband and I pay $550 a month with a $5k deductible for each of us. We never go to the doctor, and are on no medications.
The paradox is that we can only afford (barely) to pay the premium, but we cannot afford to use the coverage. With a $5K deductible and an 80/20 plan, we just don't have the money to do both.
While the President's plan has incorporated preventative care into the requirements of the policy, I still won't go to the doctor, because they are sure to "find something to treat" beyond my "discounted" visits. Then my out of pocket expenses will financially ruin us, because some doctor is looking for investors in his new Porsche.
Once you enter into the medical system, you never get out alive!
I have to agree with Kallie about the cost of medical care. It's over the top in part because there's an additional middleman. Insurance companies. What the doctor charges has to cover administrative costs of collecting payment from your insurer, so you're paying for that in the form of higher medical charges which leads to higher premiums. However, the blame doesn't only fall only on insurance companies. Malpractice insurance is high in part because the legal system is in dire need of tort reform. Lawyers are just as much to blame.
But it's not just insurance companies or lawyers. Hospitals are also guilty. Some of this is because they're in it for the money--it's a business. Same thing applies to doctors. While there are some great doctors whose passion is to help, there are just as many who are in it because they can charge a lot.
In addition, medical school tuition is through the roof; doctor's are in debt after medical school and they need to repay loans. Medical schools are businesses too, so they want to maximize their profits. In a sense, some of what doctors have to charge is justified.
None of these is the sole cause of the high cost of medical care and health insurance, but all these added together causes health care costs to skyrocket.
I've studied health care systems around the world, so let me take a look at another country which seems to have their act together when it comes to health care--Singapore. It has both socialized and private health care. It is modern, efficient, and the quality of care is high, comparable to the U.S. Health insurance isn't necessary, even for those who choose to use private care. Moreover, because of differences in the legal system, doctors don't have exorbitant malpractice insurance costs. Their educational system is government run and inexpensive so doctors don't start out with overwhelming student debt when they graduate. And I know someone's going to say, "they pay for it with high taxes", but income taxes in Singapore are low. Much lower than the U.S.
Why don't politicians go there and figure out how it works? I believe some have, but the changes needed here would be too drastic. Politicians are short term, change would probably take 10 years, there would be lots of businesses that would rail against the status quo. It's political suicide.
The Obama administration said something to the effect, "If you like your plan, you can keep it." That may be true, per se, but I felt all along this was effectively a lie. The Administration knew all along the negative affect (by design) the ACA would have on employer's group plans and it's starting to be seen in the group plan I participate in, and other group plans with other employers right here in Nebraska. And yes, I held Senator Ben Nelson accountable at the ballot box or rather Bob Kerry who was recruited to run in his place. Kerry lost.
One of the provisions reduces insurance company profit by requiring that a higher percentage of the revenues received actually go to providing health care for those insured.
This is a backlash, not a necessity. Companies used to insanely murderous profits will adjust, or go to the same grim fate to which they condemned so many by "denying coverage" or "delaying benefits".
After all, there's still a lot of money to be made in the insurance business- and if those who have been making a killing in the most literal sense of those words can't rediscover an enlightened self interest more closely resembling actual ethics, those more capable of doing business will plow them under.
Sad- and astonishingly stupid.
Companies- especially large companies- should be able to excel in this venue by leveraging economy of scale.
If that isn't happening, its either time to fire your lazy HR staff, or time to seek a new insurance company because the one you're paying doesn't value and respect your business enough to give you reason to stay with them.
Either way, someone isn't doing their job- and sure as hell shouldn't be doing business.
A third possibility exists: insurance companies working with larger companies may cutting some deal beneficial to "upper level management".
Given the current nadir in American business ethics, that doesn't seem unlikely.
How can anyone believe that the government will effiiciently run healthcare? Where have they been truly successful with anything else. Hold on to your wallets, someone has to pay for this upcoming fiasco and, if you do, don't complain. You asked for it when you voted for Obama. If the government had a record of success in handling and paying for programs then I would have some faith, but they have not. Dorothy in the Wizard of Oz clicked her heels together and said, "I believe." Is that what folks in the U.S. are doing with healthcare? Dorothy wasn't real and neither are the promises made to us. I wish.