Health Insurance – An Industry Without Answers
Patti Dunham, MBA, MA, SPHR and Ray M. Roshek

What costs the average consumer $5.52 per hour?  The answer is family health insurance coverage.  The Kaiser Family Foundation and Health Research & Educational Trust recently published the results of their 2006 Annual National Survey.  Based upon the results of the study, the total average annual premiums for employer-sponsored coverage are $4,242 for single coverage and $11,480 for family coverage.  At an average 40 hour work week, a family will pay $5.52 per hour.

This is an alarming number considering that Ohio ’s minimum wage is $6.85 per hour.  Depending upon the financial contributions of the employer, health insurance cost for a family can nearly be as much as what a minimum wage earner can make!

There are many explanations as to why our health insurance premiums have increased so dramatically (over 86% since 2000) and we have hea rd them all.  Our President and many consultants are encouraging consumerism as the solution and why not?  The traditional methods of controlling healthcare cost have been severely affected by our country’s desire to limit the insurance companies’ ability to manage.  If the insurance companies cannot manage, then the consumer must manage themselves.  This can be an extremely scary proposition since the average consumer has little to no education on healthcare choices and although we continue to try to educate our employees, many have not yet been fully successful.

One thing for certain is that government will be stepping in again in 2007 legislating for answers to impact this mammoth issue of affo rd ability; both at a Federal level and most certainly at the State level.  Some of the federal legislative priorities for 2007 include:  

q       State Children’s Health Insurance Program Reauthorization – SCHIP was created to extend coverage to low-income families to cover children not eligible for Medicaid.  The reauthorization is seeking to expand the coverage to parents or other adults.  Great idea, except, this is a program that has already crowded out eligibility for worthy children since the program has a finite access to funds.  A possible solution to the cost constraints would be to also change the funding of the program from a block grant to a new federal entitlement plan, however, it has not yet been determined.  

q       Health Information Technology and Other Means of Reducing Cost and Improving Quality – IT initiatives that will help reduce health care administration and wasteful duplication.  It is estimated that IT changes could reduce our healthcare cost as much as 20% each year.  Improvements in quality will result through a delivery of better information for doctors, tracking public health problems, and advancing clinical research.  

q       Medicare and Prescription Drug Cost – Some members of Congress would like for government to directly negotiate the cost of prescription drug prices.  Insurers of the current Medicare Part D products boast substantially lower cost than was initially expected (estimated at 30% under budget).  Other considerations include the possible re-importation of drugs from Canada , however, it is estimated that such a re-importation would exhaust supplies within 30 days.  

q       Long Term Care – A needed change for this product has been to allow pre-taxable contributions of premium.  The product would become more affo rd able through pre-taxable contributions and give incentives to the employer in offering this valuable product.  LTCI premiums are 20%-30% lower when offered in the Group marketplace.

q       Patients’ Bill of Rights – Congress indicates that they will once again be re-introduce the Patients’ Bill of Rights.  This piece of legislation would provide a means to individuals to sue their health plan OR their employer as a means to resolve disputes in care.  A bill, if passed, which would further increase health insurance premiums and costs to the buyer of these products.   

If all of that is not enough for you to absorb, we must not forget many of the private groups (federal and state) who are gearing-up to drive more change in the health care arena.

A special interest group lead by the AFL-CIO and various labor unions will be campaigning for a Single-Payer system.  SPAN Ohio (Single-Payer Action Network Ohio ) is a statewide coalition seeking fundamental health care reform in our state and country so that every resident is guaranteed full and comprehensive coverage.  They advocate a public fund that would pay all health care bills without co-payments or deductibles.  Sounds good – but who will be putting the money into the public fund?  

SPAN Ohio wants to place their initiative on the ballot and has made a lot of progress since the idea was initially introduced.  Again, education is a factor here, many individuals are not adequately informed to make a decision on a single-payer system.  What is it?  What does that mean?  What would be the impact of such a system on individuals and employers?  Many concerns that have been raised to such a system compare it to Medicare.  Seniors covered by Medicare have huge gaps in coverage and look to the private sector to improve their coverage by purchasing Medicare Supplements, Medicare Advantage Plans, and Medicare Part D coverage.  Some say the same would occur with a single payer system and we would continue to need private plans to be fully insured.

Also, we would be remiss if we did not mention consumer driven healthcare plans.  Insurance companies are quickly embracing the HDHP (High Deductible Health Plans) and employers of offering HR A (Healthcare Reimbursement Account) and HSA (Healthcare Savings Account) funding as a way to control costs.  With insurance companies embracing the plans and pricing them attractively, employers have no choice but to also move to what appears to be more cost effective plans.  

As we can see, there are many changes in the horizon.  How quickly they occur and what they will look like are uncertain.  However, one thing is certain….there will be change.  Change may not come as quickly as we all would like but it continues to be on the horizon as we can see from these various legislative and special interest program introductions.  It will be important for HR professionals to work closely with their executive staff, insurance brokers and insurance companies to create long-term strategies that meet your organizational objectives and are financially feasible.  HR professionals must continue to be proactive, stay current on proposed and enacted legislation, and must drive change to educate employees and help them understand how to get the most from their benefits.  A very difficult responsibility for all of us.

Ray Roshek is the V.P. Group Benefits for Hylant Group leading Cincinnati ’s group professionals supporting brokerage and consulting services to Ohio businesses.  Patti Dunham is a Sr. Human Resources Consultant with Strategic Human Resources, Inc.  You may contact either of them at:  Raymond.Roshek@Hylant.com or Patti@StrategicHRInc.com.