The consumer-driven heath care plan (CDHP) design has drawn the attention of many in the past several years. Much has been written about the advantages of the CDHP model, its features and functions, and the knowledge and the tools that should support it.
There have also been numerous surveys and studies relative to the CDHP model, both from a human resources perspective and from the carrier's point of view. However, the common elements within these studies illustrate several challenges faced by employers:
- Controlling health care costs
- Attracting and retaining valuable employees
- Keeping their workforce satisfied with their overall employee benefit programs
To help sidestep these challenges, more employers are turning toward the CDHP model. But while a CDHP can help control health care premiums, it also places more of a financial burden on the employee, and industry professionals are challenged in developing strategies to help balance the employer and employee relationship.
The federal government provides several tools to enhance CDHP programs, such as medical flexible spending accounts (medical FSAs), health savings accounts (HSAs), and health reimbursement accounts (HRAs). Yet each of these tools has its own set of rules and regulations that may create additional roadblocks.
Furthermore, these FSA, HRA, and HSA funding mechanisms only go so far, and surveys conclude that today more than ever, employers are implementing voluntary employee-pay-all benefit programs to further augment their CDHP model.
In spite of the abundance of information on why this CDHP system works and what its benefits are, you should focus on two key questions:
- What voluntary benefit programs work well with a CDHP model?
- How could CDHP and voluntary benefit (VB) enrollment be maximized?
Adding voluntary benefits to the mix
Over the past 10 years, voluntary life and disability insurance programs have led the way in sales. However, the CDHP model is becoming more popular, and the added out-of-pocket financial burden placed on employees has opened the door for other voluntary benefit programs, such as critical illness (which provides a lump sum benefit for heart attacks, cancer, strokes, bypass surgery, etc.) and medical supplemental programs (which cover medical plan deductibles), with critical illness beginning to out-sell disability programs at the worksite.
Consider the following: A study published in the journal Health Affairs estimated that medical bankruptcies affect about 2 million Americans every year, and further Harvard studies concluded that 76 percent of those bankruptcy filers had health insurance and that the average out-of-pocket costs for the illness that led to bankruptcy were $13,460, or $35,878 for those with cancer.
The conclusion: As employers increase deductibles and co-insurance, major medical insurance simply cannot cover all possible out-of-pocket employee costs. With the increased number of CDHP programs implemented, these out-of-pocket costs are drastically increasing, thereby offering employees the opportunity to "insure" their out-of-pocket risk (whether the expense is covered under the medical plan or not) through critical illness or medical supplement plans.
Communicate with your clients
Why CDHP and voluntary benefits? CHDPs help control health care premium costs, and voluntary benefit programs provide employees with an inexpensive way to protect their out-of-pocket costs whether they have medical insurance or not.
So how do you effectively communicate and enroll employees in these programs? According to a Watson Wyatt study on benefit communications, "A below-average benefits package supported by good communication practices has a much stronger, positive correlation with benefits satisfaction than does an above-average benefits package teamed with poor communication."
Bottom line: Without an effective communication and enrollment strategy, any type of benefit program will lose its value. And with the evolution of CDHP, employees are becoming very confused with all of these acronyms and upset over increased out-of-pocket exposure.
So the agent and the employer must be committed to increased education for the employee. As a result, it becomes more important than ever to use an outside expert like a benefits consultant or administrator who can communicate, among other things:
- Just what is CDHP and what are the laws surrounding it?
- What kinds of voluntary benefits can be offered with CDHP?
- The acronyms of FSA, HRA, and HSA and how they fit into CDHP
- ERISA, HIPAA, and comparability rules
Advanced technology
Employees are increasingly accustomed to receiving information from a telephone or computer screen. To reach the broadest possible employee audience and sell them on a voluntary benefit, programs have to be made user-friendly yet cost- effective. The technology of self-directed plans gives employees the ability to go in their personalized Web page, for instance, get info about the cost of a particular procedure or drug, and use their personal spending account in a way that makes financial sense for them.
For example, using a combination of nonprofit and governmental Web sites and proprietary offerings of vendors, the National Rural Electric Cooperative Association (NRECA) developed a Web site designed to empower plan participants by surrounding them with tools and support. With the help of this interface they provide "best practice" recommendations from the evidence-based literature, a tele-guide who is just a phone call away, comparative outcomes on a long list of diseases for any hospital in the country, information on training and background of physicians, and a questionnaire that matches the medical literature to an individual patient's precise clinical signs. These are means by which everyone from a chief executive to an elderly retiree could make an informed decision about enrolling in a CDHP plan.
Another example is the latest feature in payment technology that can power the administration of HSAs and CDHPs, to the benefit of both employers and employees. This technology would also greatly enhance a third party administrator's own efficiencies, leading to an improvement in the quality of its customer service. This kind of value-added service can only solidify business relationships and build up one's reputation in the marketplace, as well as provide an added boost to an agent or administrator's profit margins.
Outsourcing the benefit enrollment and communication process is becoming more and more attractive for employers today. Especially with the complex integration of CDHPs, HRAs, HSAs, and voluntary programs, employers are seeking partners to manage these processes.
It is critical to use an expert to help design, communicate, and administer these programs.
And with advancements in technology such as Web-based enrollments, laptop workplace enrollments, and HRA/HSA/FSA debit cards, the efficiencies employers can capture are unlimited.
Rob W. Shestack, CES is the voluntary benefits practice leader and a member of the senior management team for The Trion Group. He can be reached at 610-684-3271 or rshestack@trion.com. For more information, visit www.trion.com. Rob J. Thurston, AEP is president of HRConsultingGroup.com. He can be reached at 801-765-4417 or hrconsultinggroup@msn.com.
