Employment and Health Benefits A Connection at Risk (1993) / Chapter Skim
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3 EMPLOYMENT-BASED HEALTH BENEFITS TODAY
3 EMPLOYMENT-BASED HEALTH BENEFITS TODAY
Pages 87-120
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From page 87... ...
The persistent escalation of health benefit costs has prompted employers to become ever more involved in the design and management of their health benefit plans and to experiment with an ever-wider variety of techniques in an effort to contain their costs. Although the employers' role in financing health benefits is important, their role in determining whether and how to offer coverage is equally significant.
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From page 88... ...
.2 DOL statistics refer only to workers (not family members) who participate in an employer-sponsored health plan; the numbers include those em iChapter 1 notes that employment-based health benefits typically involve a single employer sponsor but that some involve multiple employers and unions.
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From page 89... ...
Covered Workers and Family Members Employment-based health coverage may be provided directly through one's own employer or union or indirectly through a family member's workplace.5 3For example, one study of mental health insurance costs (Frank and McGuire, 1990) noted that only 18 percent of the benefits managers who responded to a frequently cited employer survey actually answered the questions on mental health costs.
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From page 90... ...
For the relatively small percentage of those aged 65 through 69 who are employed, federal law requires that any employment-based health benefits serve as primary coverage. Employment-based coverage is most common for full-time, full-year workers (Table 3.1~.
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From page 92... ...
1611. Uninsured Workers and Family Members For 1990, some 35.7 million nonelderly Americans, nearly 17 percent of those under age 65, reported that they had no private or public health benefits during the year.
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From page 93... ...
Reproduced with permission from EBRI Issue Brief Number 123, Sources of Health Insurance and Characteristics of the Uninsured, analysis of the March 1991 Current Population Survey. meet-based coverage, compared with three-quarters of those with higher incomes (EBRI, 1992a)
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From page 94... ...
Retirees Roughly one-third of those over age 65 have retained some employment-related health benefits, most of which are secondary to Medicare coverage but some of which serve- by law as primary coverage for workers aged 65 to 69.6 Although retirees aged 65 and over accounted for about 60 6Retiree coverage may be integrated with Medicare coverage in several ways. One consulting firm described three major options (Mercer-Meidinger-Hansen, 1989, p.
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From page 95... ...
. According to DOL statistics for 1989, about 42 percent of employees who participate in health plans offered by medium and large private establishments work for organizations that offer some employer-financed coverage for retirees (DOL, 19901.
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From page 96... ...
HIAA data indicate that small firms with higher proportions of highly TABLE 3.2 Variations by Size of Employer in Percentage of Wage and Salary Workers Aged 18 to 64 with Employer Health Coverage or No Coverage from Any Source, 1990 Percentage Workers with Employer Coverage Percentage Workers with No Coverage Size of Firm Total Direct Indirect from Any Source <25 employees 54 31 23 29 25-99 69 53 1 6 20 100-499 79 65 14 12 500-999 83 69 13 10 1,000+ 84 7 1 1 3 9 NOTE: The remainder of workers had either other private or public health insurance. SOURCE: EBRI, 1992d, Table 25.
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From page 97... ...
Nevertheless, even in industries with low rates of offering coverage, firms with 25 or more employees were much more likely to offer coverage than smaller firms. According to HIAA data, in retail trade, 84 percent of larger firms but only 27 percent of smaller firms offered health coverage in 1990; for finance, the figures were 92 and 42 percent respectively (HIAA, 1991a)
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From page 98... ...
In addition, behind this dichotomy lies much variability, particularly among network health plans. Moreover, because a network plan that is more restrictive on one variable (such as coverage for out-of-network services or the extent to which access to specialists and other care is controlled by a primary care "gatekeeper")
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From page 99... ...
West Coast firms were also less likely to offer a conventional plan than firms in other regions. Currently, conventional plans enroll between three-fifths and threequarters of all participants in employment-based health plans (DOL, 1990, 1991; Hoy et al., 1991~.
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From page 100... ...
Other plans, such as PPOs, POS plans, and open-ended HMOs, cover enrollees for some nonemergency services received from nonnetwork providers but typically impose higher deductibles, coinsurance, and other employee cost sharing for such care. In essence, employees can choose between network and nonnetwork services when they seek care rather than once a year when choices among health plans are made.
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From page 101... ...
90ften these mandates do not apply to individually purchased insurance nor to HMOs (Health Benefits Letter, 1991)
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From page 102... ...
Today, virtually all those covered by employment-based health plans are covered for inpatient hospital care (including prescription drugs) , outpatient surgery, physician hospital and office services, and outpatient prescription drugs (DOL, 1990, 1991~.
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From page 103... ...
In addition, coverage may be limited under the terms of some utilization management programs that reduce or deny benefits for care judged medically unnecessary or care not reviewed in advance for appropriateness. Conventional health plans typically make the enrollee responsible for any added costs, whereas many network plans make the health care practitioner or provider responsible.
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From page 104... ...
Coinsurance refers to coverage of eligible health care expenses that is split between the health plan and the enrollee. The most common split for coinsurance in conventional health plans is 80/20, meaning that 80 percent is paid by the health plan and 20 percent is paid by the employee (DOL, 1990, l991J.
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From page 105... ...
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From page 106... ...
Neither judicial nor state legislative requirements for "parity" reach self-insured employers. A recent proposal for a model mental health benefit in private health insurance noted that 10 of 26 health care reform bills introduced in the 102nd Congress did not explicitly require mental health coverage and most of the remainder provided special limits on such coverage (Frank, Goldman, and McGuire, 1992)
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From page 107... ...
____ _ _ ~__~_ _________ _ ____ _ ______ _ _ __ __ __ _ __ __ __ | · Private health Insurance ~ ~ ~ Public programs i · ~1 ~ Health services and supplies: $643.4 Hospitals $256.0 Drugs and medical sundries $54.6 Physicians $125.7 Dental care $34.0 Nursing Home $53.1 All others $120.0 · Private health insurance HI Public programs ~ Other private payments 1 1 1 1 1 ', ~ 1 1 ._ I FIGURE 3.3 Flow of funds from sponsors of health care into the health care system in the United States, 1990. Nonpatient revenues include revenues from philanthropy and income from the operation of gift shops, cafeterias, parking lots, and educational programs, as well as those received from assets such as interest, dividends, and rents.
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From page 108... ...
Figure 3.4 reports data from one survey on changes in average combined employee-employer spending on health benefits per worker from 1985 to 1991 (Geisel, 19921.~3 Table 3.7 shows HIAA data on rates of premium increases broken out for nonnetwork and network health plans for 1989, 1990, and 1991 (Hoy et al., 19911. Administrative Expenses HCFA attributes 5.8 percent, or $38.7 billion, of total national health expenditures to the costs of administering publicly financed health programs and philanthropic organizations and to the cost of private insurance net of benefit payments (Levis et al., 19911.
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From page 109... ...
1 990 S3,605 (1 2.1 %) : BLOC = 1~1 FIGURE 3.4 Growth in health plan costs, expressed in total dollars per employee for 1985 to l99l and percentage increase from previous year (includes employer and employee costs for indemnity plans, HMOs, dental plans, and vision and hearing plans)
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From page 110... ...
Government officials, insurers, and others have recently met to develop simpler, more standardized, and it is hoped less costly procedures for administering public and private health benefits, but it is too early to project the consequences. Tax Expenditures Another important element in the financing of health care benefits is the exclusion of employer-paid health insurance premiums from the calculation of an employee's taxable income.
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From page 111... ...
Although many employers still use this mechanism, an increasing number bear all or most of the risk for employee health care expenses themselves; that is, they self-insure or self-fund their health benefits. The range of funding mechanisms available to employers extends from fully insured plans to fully self-insured arrangements, and the details can be difficult to understand (CRS, 1988a; HIAA, 19921.
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From page 112... ...
Employers who purchase insurance have premiums established in a variety of ways, some of which require significant sharing of risk with the insurer and other insured groups and some of which do not. For groups perceived as too small to have predictable claims experience, insurers generally set premiums using a manual that provides rates based on claims experience for different classes of employers.
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From page 113... ...
An employer may establish another type of partial self-insurance arrangement wherein it covers claims expense up to a defined level and purchases stop-loss insurance for expenses above that level. Specific stop-loss coverage applies when claims for a individual health plan member exceed a defined level, whereas aggregate coverage applies when total claims exceed a designated amount (e.g., 125 percent of total expected claims expense)
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From page 114... ...
. Over the long term the new accounting standards by themselves will have little impact on the organization's liabilities, expenses, or net worth, but this one-time "step up" in liabilities is prompting many employers to limit retiree health benefits in some way.
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From page 115... ...
Many public and private decisionmakers are growing increasingly concerned about the financial problems facing workers' compensation programs and are exploring ways to integrate workers' compensation, disability, and health benefit programs (Freudenheim, 1992a; Traska, 1992; Warren and Gerst, 1992~. One objective is better management and coordination of health care provision and health plan features and, thereby, better control of health care and administrative costs.
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From page 116... ...
Health Promotion and Employee Assistance Programs Rising health benefit costs and accumulating research or the correlations between health status and health care expenditures, absenteeism, and other associated business costs have combined with broad public interest in health promotion to increase employers' interests in strategies for achieving a healthier and less costly work force (Warner, 1990; Becker, 1991; EBRI, l991b; Muchnick-Baku and McNeil, 1991; Muchnick-Baku and Orrick, 1991; Weiss et al., 1991; Conrad and Walsh, 19921. Because employers' costs for health benefits are not a fixed percentage of payroll (as are Social Security taxes)
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From page 117... ...
Some employers reinforce their health promotion messages with changes in their health benefit programs. For example, health plan coverage may be extended to preventive and wellness services that were previously not covered.
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From page 118... ...
Some see corporate health promotion programs as potential means to "select or shape workers in the name of health, bypassing modern discrimination laws that have limited the employer's degrees of freedom to select and fire employees" (Conrad and Walsh, 1992, p.
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From page 119... ...
Flexible Benefits Although not a health benefit program per se, various kinds of flexible benefit programs established by employers may significantly alter employment-based health benefits. Under provisions of the Internal Revenue Code, these programs allow individual employees some choice in the way benefit dollars are allocated and taxed (EBRI, 1991a)
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From page 120... ...
120 EMPLOYMENT AND HEALTH BENEFITS: A CONNECTION AT RISK To supplement the general, often statistical portrait presented in this chapter, the next chapter examines in more detail what employer sponsorship of health benefits may involve for employers, employees, and health care providers. It stresses the array of decisions and tasks that employers may take on and the factors that affect their decisions.
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