Guidance for Employers to Choose the Right Set of Medical Plans

Plan Design

Generally, an employer may choose a set of 1 to 4 plans based on their grasp of the employees’ health needs and their demographic diversity.

• Very small firms may choose to keep a single plan for administrative simplicity.
• Most firms may offer a choice of 3 plans that serve the diverse needs of the covered population, a high, a medium, and a low plan.
• Some Carriers who custom-design to an employer’s needs may limit the offer to a choice of two, in certain employer segments.
• The 4th plan as a catastrophic option can be added to the offering. This is relevant to employers who have a sizable single-employee population and the employer happens to contribute low. A catastrophic option can have very low premiums; it helps to attract young and healthy employees into the employer’s risk pool.
• ACA marketplaces provide a lot more choices, but often these may not serve any incremental value, but add more confusion among employees.
• When you have a choice of multiple plans, it can challenge the claims funding as it allows cherry-picking within a smaller group of employees. To that extent, it increases the risk from a carrier perspective and can have an impact on the premium.

There has to be a variation in the quality of benefits and the employee’s cost – both to the premium and the out-of-pocket costs and they have to balance together. In other words, your plan design if done correctly, will meet the needs of the population overall without creating an adverse selection within the population. An adverse selection will not sufficiently fund the claims relative to the risk level of the firm and will cause challenges.

The decision to include an HSA plan is another factor under consideration. If an HSA plan is offered, there will be a need to include HSA administration services that will normally include an additional fee per employee per month. The employer will have to decide if they would like to contribute to the employee’s HSA account as part of their contribution strategy. HSA plans are getting increasingly popular among employees and are fast becoming the equivalent of 401K for managing healthcare expenses.

Contribution Strategy

Employers can also contribute through gap-fund plans such as the HRA, HSA to help employees’ out-of-pocket expenses. Contributions to HRA can be subject to for instance only deductible expenses or expenses towards engaging in a specific health improvement program. In certain cases, the employer’s contribution to the gap-fund plan may increase the premium as the carriers perceive this as subsidizing employee’s cost that is meant to establish individual accountability towards the right use of care.

Overall, contributions cannot be varied based on employees’ medical conditions or health status, however, can be varied to different groups or classifications of employees for work reasons. For instance, type of employee (full-time vs. part-time), location of employee, retiree vs. active, etc.

Funding Models

Employers with fewer than 5 enrolling employees have a limited choice of ACA-based fully insured plans. They can also simply contribute to the HRA account and let employees buy plans from ACA Individual Market.

Employers with 5 to 50 employees have the choice of selecting fully insured ACA market plans or level-funded plans. Level-funded plans are competitive alternative plans to the ACA plans.

Employers with 51 to 100 employees have the choice of selecting fully insured ACA market plans in some markets or certain level-funded plans. Some carriers may not offer level-funded plans to employers with 51 or more employees, although this may be in the short-term. They continue to expand the maximum allowed employees.

Employers with 100 to 250 employees have the choice of offering level-funded plans or fully insured regular plans.

Employers with 250 and above employees have the choice of offering level-funded plans or self-insured plans.

Health Improvement Services

Employers have the ability to influence the plan design towards promoting employee health and wellness. Most of these are done in the Self-funding model or level-funding models by TPAs who have greater flexibility in the program design.

Buy biometric screening packages that cover testing for cholesterol, HDL, LDL, Triglycerides, TC/HDL ratio + glucose Cholestech Fingerstick Blood Analysis, Blood Pressure, Height/Weight/BMI, Educational Biometric Result Video, etc.

Biometric test results can be integrated with employees’ provider records as well. This creates a great awareness of their health status and provides early alerts to steps they could take to avoid potential emergency situations or a high-cost condition.

Additional wellness programs and appropriate incentive models for doing exercise and fitness play a role in reducing the long-term health risk of the company thereby contributing to containing the employer’s healthcare cost inflation.

Cost Containment Program

Self-funded and level-funded programs for above 100 employees have a lot more flexibility to design the medical plan description and pharmacy benefit plan description appropriately to promote certain behaviors among employees.

For instance, appropriate prior authorization enforcements can be put in place. Use of generic drug vs brand drug and the controls around who pays the difference between brand discount and the generic discount. Restrictions on specialty drugs are very expensive.

Networks

Carriers are providing specialized and narrow networks suited for employees based at the core location of the employer. Such network products have a lower premium. Some of the products may not cover out-of-network coverage at all. If an employer has a population very diverse geographically and if they are spread around, the narrow network options may not work out.

Products that may use a rich national network, however with no out-of-network coverage have a slightly lower premium. If the employer chooses to offer these, it is important to communicate sufficiently and let employees know that they should not seek out-of-network coverage. They may allow such coverage however in emergency situations.

PPO networks with no referral requirement have a higher premium compared to HMO and regional networks.

Carriers vs. TPAs

Carriers are providing specialized and narrow networks suited for employees based at the core location of the employer. Such network products have a lower premium. Some of the products may not cover out-of-network coverage at all. If an employer has a population very diverse geographically and if they are spread around, the narrow network options may not work out.

Products that may use a rich national network, however with no out-of-network coverage have a slightly lower premium. If the employer chooses to offer these, it is important to communicate sufficiently and let employees know that they should not seek out-of-network coverage. They may allow such coverage however in emergency situations.

PPO networks with no referral requirement have a higher premium compared to HMO and regional networks.