I am a recently retired HR professional, and I'd like to share some of the experiences I had when confronting the challenges of providing employees with reasonably priced, high-quality health care. These experiences show why employers, and small businesses in particular, are stakeholders in the current health care reform debate.
For 25 years I was the director of administration, and later vice president, of a small company of about 150 people in the Washington, D.C., metropolitan area. One of my primary responsibilities was managing the company’s health insurance and benefits program for our staff.
When I started in the early 1980s, the process basically consisted of finding an insurance broker, putting together an employee census (number, ages, family members, etc.) and reviewing five or six proposals from various health insurance companies. There was always a high and a low bid, but usually a good "in-between" price to provide the health insurance most of us were accustomed to at the time — $100 deductible, 80/20 percent co-pays, what have you.
Up … and Up … and Up
Our employees were overwhelmingly young (under 40, many under 30) and therefore relatively healthy. But even before MRIs (magnetic resonance imaging scans) and colonoscopies were in common use, before prescription Paxil became popular (for treating anxiety), and before the Health Insurance Portability and Accountability Act (HIPAA) was enacted in 1996, we still experienced double-digit increases in our insurance premiums every single year (maybe once it was "only" 9 percent).
This was despite spreadsheets showing how much we paid the insurer through our premiums over a 12-month period and how much the insurer had paid out — which almost always demonstrated that the insurance company made a profit on our business.
What choice did we have? If you offer no health insurance, nobody will work for you. We paid the increases. And we wouldn’t switch companies until costs reached a level we just couldn’t afford; changing health plans is hard on employees, requiring many to change pediatricians, obstetricians, family practitioners and dentists.
The Bidding Game
We soon learned that when we solicited new proposals from different insurers, the low rate we were given was short-term, and the double digits would start right back up in Year Two.
As the insurance companies came up with new approaches — the primary care physician/gatekeeper, health maintenance organizations (HMOs), preferred-provided organizations (PPOs) — we had to conform. I was not spending time growing our business or helping staff develop and succeed; I was spending hours explaining health plan changes, writing up memos, having staff sign affidavits that they read the changes and so on.
Fine, we all said, just as long as we have our health insurance. Because now stories were emerging in the news of people without health insurance owing a hospital several hundred thousand dollars or losing their home. Most of us in management were Baby Boomers and our parents had never been concerned with owing a hospital anything, ever—one way or another, everything was covered. Now, without insurance, your life could be ruined.
Up went the costs, double digits in the teens, year after year. And along with it, in order for us to provide insurance, we started having to remove benefits, as well as to raise staff’s share of the premium. Juggle, juggle — "Who gets hurt the least this year?" was the question asked over and over again.
No Self-Insured Panacea
One year a benefits consultant recommended we try “self-insurance” — where the company writes checks to the employees directly for their health claims and buys only “stop-loss” insurance to protect the company in case claims go over a certain amount — for example, the first half-million in claims is on us, the next half million and beyond is on them. Because we had seen year after year that we were paying more in premiums than in claims, it made sense to give this a try.
And yet after the first year we still had to raise the employee share of the premium in order to continue the coverage; doctors’ and hospitals’ costs were going up, and there were new procedures and new medications turning up every year.
At one harrowing staff meeting, an employee stood up and blamed the cost hike on a particular employee’s major critical illness, of which everyone was aware. Yikes. Our “self-insurance” was getting way too personal.
Back to “regular” fully funded insurance. Now they tell us, "You need a gatekeeper with this plan. You don’t need a gatekeeper with that one. You need to call a hotline first. You need to ask if you can go to the hospital."
We had a gatekeeper in 1990 when my toddler broke his arm; we brought him to an urgent care center where the staff told us that they couldn't X-ray him but they recommended he get an X-ray immediately. We had to drive 15 miles in rush-hour traffic to the facility where he could get the X-ray, and then drive with it to a hospital that could treat him, which was 10 miles back in the other direction. We had left home at 3:30 p.m. and returned home at midnight.
My co-worker friend needed an MRI as recommended by her primary care physician for a painful injury; the covered facility was in the same building. But my friend accidentally walked into Door No. 2 (right next to Door No. 1 in the building), had the MRI and was denied reimbursement because she went through the wrong door; Door No. 2 wasn’t in The Plan. Though the cost was the same, the insurer would not pay her claim to the facility or reimburse her for the expense.
Consumer-Directed Conflicts
A few years ago, we were visited by a new kind of health insurance company encouraging us to try the new "consumer-directed" plans. These plans are based on the idea that employees need to be responsible for their own health decisions, and that, if they are smart, they could accumulate tax-deferred money that would pile up to the end of time — if we implemented health savings accounts (HSAs), the latest thing that would save the company money.
It worked like this: We would establish a $1,000 deductible for an individual, and, instead of paying a premium, each individual put pre-tax money into his or her account. If employees were young and healthy, they presumably would pile up the amount in their HSA over time. If an employee wasn't healthy and was making claims, and therefore having little or no money in his or her HSA, no problem, right? Because all they have to do is spend the $1,000 deductible, and then everything else would be taken care of by the insurance plan. And, as promised by the salesman standing there, not one benefit in our current health plan would change with the switch to the HSA.
It sounded great, because we were always especially sensitive to our employees’ out-of-pocket costs. Given that most of them made less than $40,000 annually, we decided that the $1,000 deductible recommended by the insurance company was too high, so the company would pay the first $500 of the deductible, with the second $500 coming out of the employee’s pocket.
But when presented by the insurance company in front of the entire staff, it turned out that the new plan did not exactly match the old plan. For example, if a mother goes to the emergency room, and the visit costs $1,500 (the typical cost), then she has just spent the entire $1,000 deductible and now owes $500 to the insurer, because she didn’t call the nurse hotline first when her 4-year-old woke up screaming in the night with horrible stomach pain.
In this case, it was just bad gas pain. However, the insurer would have paid if the employee's son had been admitted to the hospital with a more serious health problem, even without calling the hotline first. But how does a non-medical-professional know that an apparent emergency is really a false alarm?
Psychologically, some employees resented that they were “forced” to put their earnings into a savings plan they couldn't touch unless disaster struck. They didn’t see paying premiums as a negative, but calling this “their” money changed their perspective. A number didn't or wouldn't go to the doctor unless it was absolutely necessary because they were desperate to preserve the first $500 of the deductible paid by the company — because they would never be able to pay the second $500 out of pocket.
When I left the company in 2007, we were paying the health insurer over $1 million a year for our staff of about 120. And the staff paid as much as 30 percent of the premium out of their own pockets.
Before I retired I was at the table-pounding stage. It is infuriating and overwhelming to sit in benefit renewal meetings every year and decide, basically, how to hurt the least number of people. These shouldn’t be business decisions. They shouldn’t even be on the business table.
I don’t even want to calculate the costs of my time, my team’s time, senior management’s time, staff work hours, billable hours lost, and plain old cash paid out over those 25 years so that someone could have a baby without going bankrupt when there were complications, or so someone else could survive financially after a car accident requiring months of care.
We have assumed this responsibility out of business necessity, and have maintained it because we care about our staff. We would prefer to hire more people and pay them more. We cannot do this in the current health care system.
Ask any benefits manager for any small business and you will hear the same stories.
Christine Worth Miller was vice president and director of administration at a professional services company in northern Virginia, where she worked for 25 years, and has been a member of the Society for Human Resource management since the early 1980s. Recently retired, she is a recruitment and HR consultant.
Related Article—External:
Health Care Divides Small Business Community, Fortune Small Business (via CNNMoney.com), September 2009
Related Articles—SHRM Online:
Micro-Businesses Offer Opinions on Health Care Reform, SHRM Online Benefits Discipline, June 2009
Health Care Costs, Reform Are Top Small Business Concerns, SHRM Online Benefits Discipline, December 2008
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