Multi-Year Planning
A quality Consumer Driven Health Plan (CDHP) benefit package can save both the employer and the employee money, help employers attract and retain employees, and increase employee morale. By offering a CDHP, you can position yourself as a leader in the emerging market, as well as a health care advocate, by providing the tools to:
- Control the employer's health care budget
- Design plans that give employees choices
- Encourage employees with cost-saving incentives
- Empower employees with web-based tools
It's time to go beyond the typical plan year renewal and start building a multi-year strategy.
It is important to approach CDHP as a long-term solution. Take a look at the following case study of one employer's experience with CDHP implementation and take special note of the significant increase in participation the second year. This employer is confident that their CDHP offering will continue to increase in popularity in the years to come.
Case Study
In 2005, "ABC Company", an Arkansas-based employer with 47 employees, implemented an Employee Health Plan Menu. From this menu, the employee could choose from three different High Deductible Health Plans (HDHP). Each plan option was designed to benefit the employees in different ways by providing diversity in out-of-pocket expenses and deductible amounts.
The table below shows how one HDHP policy from one carrier plus the services of a CDHP Administrator can create three or more different plan options.
Option A: 4-Tier |
Option B: 2-Tier |
Option C: HSA |
|
| Deductibles | $250 Individual $500 Aggregate Family |
$1,000 Individual $2,000 Aggregate Family |
$2,600 Individual $5,200 Aggregate Family |
| Co-Insurance |
20% Co-Insurance $3,000 Individual $6,000 Family |
20% Co-Insurance $3,000 Individual $6,000 Family |
20% Co-Insurance $3,000 Individual $6,000 Family |
| Pharmacy/Office visits applied to deductible and co-insurance. | |||
| Out-Of-Pocket | Individual $800 Family $1,600 |
Individual $1,400 Family $2,800 |
Individual $2,680 Family $5,360 |
| Premiums/ Contributions |
Employee Only $360 Annual Employee & Spouse $900 Annual Employee & Child $720 Annual Family $1,080 Annual |
$360 Individual HRA $720 Employee + Dependent HRA No Premiums |
$900 Individual HSA $1,800 Employee + Dependent HRA No Premiums |
Due to the comprehensive education they received on the benefit plans, the employees greeted the options with gusto. In fact, none of the employees elected the plan with lower deductibles and co-pays. (See Figure 1).
Figure 1: 2005 Elections
With the help of the company’s CDHP Administrator, DataPath Administrative Services (DPAS), ABC Company was able to engineer a plan that not only saved them money, but also allowed their employees a feeling of control.
ABC Company
Financial Performance Report
2005 Benefit Plan Year (1.1.05–12.31.05)
| Projects | ||
| Pre-CDHP Annual Insurance Premium | $313,828.08 | |
| HDHP Annual Insurance Premium | $137,778.24 | |
| Annual Premium Reduction | $176,049.84 |  |
| HRA/105 Claims | -$40,834.14 | |
| Annaul HSA Employer Contributions | -$44,100.00 | |
| PSP Annual Admin Fees | -$15,420.00 | |
| Adjusted Discretionary Budget | $75,695.70 |  |
| Enhanced Benefit Coverage (paid by employer) | ||
| Annual Premium: Dental | $21,994.36 |  |
| Annual Premium: Accident | $17,204.30 | Used to Purchase Benefit Enhancers |
| Annual Premium: Cancer | $14,626.50 | |
| Annual Premium: Heart/Stroke | $6,986.44 | |
| Enhanced Benefits Cost | $60,811.60 | |
| Retained Employer Money (as compared to 2004) | $14,884.10 | |
With the 2006 enrollment year, the company migrated to the 2nd phase of their multi-year benefit strategy without a new carrier or applications. They phased out Plan A, and carried over both Plan B and C from the previous year. They also included a new plan, Plan D, which had the same employer contributions as 2005’s Plan C, but had a higher deductible.
This plan allowed the employees to elect the maximum HSA contribution allowed by law. You will notice the shift as the employees became even more comfortable with the CDHP model (See Figure 2). This plan allowed the employees to assume more control while still providing more benefits.
Figure 2: 2006 Elections
According to the HR Manager for ABC Company, “Making the change from conventional insurance coverage to a Consumer Driven Health Plan took a commitment from the employees as well as management. It wasn’t always painless, but we had DataPath with us at every step of the learning process.
At the end of the year we could look back and see that we had successfully provided health insurance for our employees and their families, added a wider array of coverage than we had ever offered before, and still saved premium money. The fact that much of the money that would have gone to premium payments in a conventional plan, was now in the HSA accounts of employees made our “pioneer” year worth the effort.”