One size has never really fit all in the world of employee benefits, and at the same time employers began trying to better control their costs, they began offering more choices to employees: health maintenance organizations, preferred provider organizations and now consumer-directed health plans. The next step for employers is a defined-contribution approach to employee benefits funding, which takes advantage of the CDHP move toward more individual involvement of employees.
For example, in March, Cigna introduced Custom Benefit Builder, a new health plan that promises more flexibility in plan design for employees and a platform for stabilizing health-care costs for employers.
Available in January, the program allows employers to specify how much they will contribute to health benefits and then allows employees to structure their CDHP-style plan with varying choices of deductibles, copays, coinsurance levels and out-of-pocket maximums.
Using online tools provided by Cigna subsidiary Choicelinx Corp. in Manchester, N.H., employees calculate their family's annual health-care costs, including preventive care, doctor visits and chronic-care costs, then pick from a variety of plan design options. Cigna product manager William Giaconia says the program also gives employers more control over their own spending and can be structured to meet employer cost-management goals.
Employees should like it, too, according to a survey conducted by Ipsos Public Affairs for Cigna. More than 80 percent surveyed by the company said they would value the ability to personalize their health insurance to their needs and budgets, and 79 percent said they were confident in their ability to make good choices for themselves and their families about how much coverage they need and how much they are willing to pay.
Extend Benefits Group LLC in Salt Lake City is marketing an even more aggressive approach to employer-defined contribution for health care. A health benefits broker and third-party administrator, Extend Benefits allows employers to set their defined contribution for health insurance and then guides employees through selection of an individual health insurance policy purchased from the open health-insurance market.
The company says employees can choose from hundreds of plan options offered by leading health insurers--many of whom have increased their offerings in the individual health insurance market since the introduction of health savings accounts and health reimbursement accounts.
Senior Vice President Brian Tenner says employers can save as much as 30 percent on their health-benefits budgets and provide more employees--including seasonal and part time--with coverage that is more portable than group coverage.
However, there are downsides. Employees would be subject to individual underwriting by the health insurers, and some employees--particularly those with chronic conditions such as asthma and diabetes--may not qualify for commercial coverage.
About 40 states now have state-guaranteed coverage for individuals who have been rejected, but rates are higher than market coverage and the plans may offer lower limits and less coverage for some conditions.
Individual health insurance policies are popular with conservative health reform organizations, including the Washington, D.C.-based Heritage Foundation, which has been promoting the idea of federal tax credits for individuals who purchase their own health insurance.
LEN STRAZEWSKI, a professor and benefits expert, is a columnist for Risk & Insurance®.
July 1, 2006
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