Designing the Right Health Benefit Plan Chapter 30 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company1 Important Considerations Health care plans are an important employee benefit Health care plan design is dynamic, rising costs and an aging workforce create significant challenges for employers Thoughtful design of health benefit plans is essential

Designing the Right Health Benefit Plan Chapter 30 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company2 1. What health benefits do employees want? –Ask employees about their needs –Typically, young employees want to maximize benefits for childbirth and pediatric care, while older employees want adequate coverage for major medical expenses –Cafeteria plans and flexible spending accounts are major tools in effective health benefit design

Designing the Right Health Benefit Plan Chapter 30 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company3 2. Plan design features –Three vital aspects: 1)efficient delivery of the benefits 2)meeting employer cost constraints 3)positive employee perception of plan –Plan design offers opportunity for cost control; managed care plans put more cost control in hands of employer than traditional postpaid health care plans

Designing the Right Health Benefit Plan Chapter 30 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company4 Managed Health Care Tools and Techniques Prospective pricing Peer review Negotiated discounts Utilization review Channeling Quality review Bundling of services Cost sharing Capitation payment Lifestyle management

Designing the Right Health Benefit Plan Chapter 30 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company5 “Defined Contribution” Health Plans Shift payment and selection from employers to employees Health Savings Account (HSA) –employee covered under high deductible health insurance contract –employee contributes to IRA-like account to pay medical expenses –HSA contributions are limited

Designing the Right Health Benefit Plan Chapter 30 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company6 3. Health benefits for executives –Current laws allow employer to provide health benefits for selected executives that are more than or different from those provided for employees in general

Designing the Right Health Benefit Plan Chapter 30 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company7 4. The process of design and maintenance Components of design and maintenance: –plan design –communication with employees –financing the plan –claims administration and payment –periodic plan review and update –compliance with federal and state regulatory agencies

Designing the Right Health Benefit Plan Chapter 30 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company8 4. The process of design and maintenance (cont’d) Responsibility for plan components can be split in various ways: –employer does all –employer delegates some or all –recently, specialized organizations have developed that carry out specific responsibilities

Designing the Right Health Benefit Plan Chapter 30 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company9 True or False? 1.A “one size fits all” type of health plan is generally cheaper and is accepted by employees just as well as a health plan that tries to consider individual characteristics. 2.Health plans can be used in cafeteria plans, but not in flexible spending accounts. 3.Traditional health care plans are postpaid plans.

Designing the Right Health Benefit Plan Chapter 30 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company10 True or False? 4.Prospective pricing means the employer negotiates price of health care services before the services are needed. 5.The purpose of cost sharing is to encourage employees to limit health care spending. 6.A “defined contribution” health plan places all burden of payment on the employer.