advantage logo
Issue: # 21 September 28, 2008
78 pleasant
Greetings!
 
Keeping you informed of the latest developments in the employee benefit marketplace. 
If you have any questions, e-mail Bill or Vanessa.  To learn more about Advantage Benefits, click here.     Many of our clients have found these newsletters to be quite helpful and we have now set up a link to hold all the archived newsletters on-line that can be accessed at anytime. 
 
If you know anyone, who may find this information of interest, please forward them this newsletter (there is a link on the bottom), and they can subscribe themselves.  
 
Sincerely,
 

Bill Randell, CLU, CHFC             Vanessa Costa, CLU,CHFC
Advantage Benefits Group, Inc. 
Massachusetts Health Reform  
Costs Much Higher Then Expected
The Commonwealth of Massachusetts efforts to provide Universal Health Insurance was expected to cost $200 to $400 million dollars.  Recent estimates have the true cost closer to the $1.3 billion dollar range.   
   
In July, legislators passed a law, requested by Governor Deval Patrick, that requires hospitals to contribute an additional $28 million to help finance the new healthcare law.  In addition, they will raise another $33 million from an assessment on insurance company reserve accounts.
 
What's next?    The Commonwealth is looking for ways to generate more revenue to fill this gap.
Who will they turn to ? 
 
They are now proposing to increase the minimum employer contribution levels and the penalties for those businessess not in compliance.
$1,000 Hospitalization
Becoming the Norm
 
As premiums for health insurance continue to escalate, employers continue to introduce plans that increase co-payments.  Employers with plans that have a $0 co-payment for Hospitalization & Day Surgery are rarely found.  The insurance carriers are pricing those plans out of range and forcing employers to  seek alternate plan designs.  The theory is the monthly savings from premiums could pay for any incurrred hospitalization co-payments.
 
Not only has this worked, but we now see the $250 co-payment plans turnover to $500 and $1,000 co-payment plans.   Looking at our client base, we see the most common hospitalization co-payment is $500 to $1,000, with a lower co-payment for out-patient surgery. 
$1,000 Hospitalizations 
How Do Employees Pay For It?
Since the trend is passing on higher co-payments to employees, the question then becomes, how do employees pay for those higher co-payments, and what if employees have multiple hospitalizations in a calendar year.  This is where the employer has discretion.

Employers may fund all or a portion of a defined co-payment - usually hospitalization, or day surgery, or both. This arrangement is defined as a  Health Reimbursement Account (HRA). This arrangement should be defined in writing and may also inlcude any maximum dollar amounts to limit the exposure. 
 
There are also employers who choose not to fund any of the co-payments.  Some employers offer Flexible Spending Account (FSA) where employees defer monies on a tax deductible basis to cover  out of pocket expenses.  This may be a complex process where employees need to be educated on how the program works.  More importantly monies in an FSA can not be rolled over and must be used or subject to forfeiture. 
   
Although this is fast becoming one of the most common plan designs, thought must be given to consider how employees will pay if they do in fact get a $1,000 bill.
 
$1,000 Hospitalization Co-payment or $1,000 Deductible Plan?
Be careful of the terminology
Co-payment versus Deductible
 
Over the last 10 -15 years co-payment plans have dominated the marketplace.  This is basically a fee for service plan.  There is a defined schedule that lists the cost for a defined type of service.  Typical co-payments are for office visits, emergency services, day/outpatient surgery and hospitalization.  So, in a $1,000 hospitalization co-payment plan, an individual will pay the $1,000 per occurence - to a defined maximum out of pocket total.

All of the carriers have re-introduced traditional deductible plans.  So, if you have a $1,000 deductible plan, this means the first $1,000 of expenses will come out of your pocket - even for office visits.
A key point with the deductible plans is the carriers make a distinction between Routine VS Diagnostic.  A routine office visit is the annual physical with your primary care physician.  This is once a year and will only cost the office visit co-payment.  Conversely, if you have chest pains and visit your primary care this is considered a diagnostic office visit.  You will pay for the office visit co-payment plus the cost of the labwork, scans, and any additional testing the doctor or lab
performs. This means one office visit could potentially eat up most of your $1,000 deductible.


Which plan is best for your?  Let Advantage Benefits help.  We also make sure the plan is properly communicated to employees so there are no misunderstandings.