HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Sunday, November 16, 2008

Employers Offer Workers Fewer Health Care Plans

The New York Times reports that many workers are finding fewer options being offered for health care as many companies only offer high-deductible plans to employees.  Milt Freudenheim writes,

Stethescope6It’s the annual “open enrollment” season in corporate America, when employees choose their medical plans for the coming year. But this time, even if they are fortunate enough to have a job at a company that still offers health benefits, many workers are finding that the buffet of options has been trimmed to a very short menu.

And typically the offerings now include a health plan with a financially daunting feature: a high annual deductible that is likely to be $1,100 or more for an individual, and much higher for family coverage. Under conventional insurance, the annual deductible — the amount an employee is obliged to spend on medical care before the insurance begins — may be only about one-third as high.

Employers generally try to offset the high deductible with a somewhat lower monthly premium than workers pay with conventional insurance. Another deal sweetener is the opportunity for the worker to put money in a tax-sheltered health savings account whose balance can grow year after year. Many employers also make contributions to those worker accounts.

Despite such lures, high-deductible plans have received only tepid acceptance from employees since they were introduced in 2002. But this year, at more than 100 large companies and hundreds of smaller ones, the high-deductible plans are the employee’s single take-it-or-leave-it option.

One of those companies is the automaker Nissan, which is offering only high-deductible plans to its 15,000 United States employees for the coming year. Another is Delta Airlines.

Most large companies still do offer a choice between high-deductible plans and more conventional insurance, which means workers must try to decide which approach is best for them.

Typically, if consumers run the numbers, they will find the high-deductible plans are most attractive to healthy single workers who do not expect many medical costs — or to families who know their medical costs will quickly exceed the annual out-of-pocket maximum, after which their medical care is covered 100 percent. But even for those people, the lower premium does not compensate for the much greater out-of-pocket payments they will make before reaching that high deductible.

Such plans “put a lot of financial burden on employees in a way they haven’t felt in the past,” said Peter V. Lee, executive director for health policy at the Pacific Business Group on Health, a West Coast employers’ group. “If you are a heavy user of health care,” he said, “health maintenance organizations have more generous coverage.”

In one variation of the Nissan plan, the deductibles for a family are $2,500 for each person, with a $7,500 maximum for the family. Monthly premiums are about $100 for a family — or $35 for a single worker.

As an enticement, the company will deposit up to $1,600 in a family’s health savings account. And annual physical checkups, well-child care and immunizations, as well as flu shots and cancer screenings, are covered 100 percent even before the deductible has been reached — a feature similar to many traditional health plans.

Marlin Chapman, the benefits director at Nissan, says the high-deductible plans are “aimed at getting people to focus on their health.”

“When you are spending your own money,” Mr. Chapman said, “you are more careful in the way you spend it.”

Betsy Talton, a Delta Airlines spokeswoman, offered this reason, in part, for her company’s making high-deductible plans the employees’ only choice: “We felt it was important to offer a plan that encourages participants to manage their health care and maintain their health and enables them to get the most out of their health care dollar. We find that when people get engaged in their health care they generally get healthier.”

As a cost-saving measure for employers, the high deductibles are meant to make workers think hard before spending out-of-pocket cash on doctors, emergency room visits and expensive diagnostic tests. President Bush has advocated the plans as a “consumer-directed” way to rein in health care spending.

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