Author: Site Staff

Employers in Southeast Michigan expect medical benefit expenses to increase 7 percent this year, despite taking steps to shift costs to employees, using wellness programs as a cost-containment device and offering more high-deductible health insurance plans, according to Troy, Michigan-based McGraw Wentworth’s seventh annual 2010 Southeast Michigan Mid-Market Group Benefits Survey.

“We saw big changes this year in benefit plans that surpassed national averages in some respects,” said Rebecca McLaughlan, McGraw Wentworth’s managing director.

McLaughlan said the survey showed that Michigan employers continue to cut back on historically rich benefits to come in line with national trends.

With Michigan’s economy in recovery, McLaughlan said some companies made tough choices to reduce costs in 2009 by changing benefit plans, but other companies are “catching up” this year.

“Employers are under real pressure nationally to cut costs” because the poor economy is still putting a damper on revenue growth, said Karen Alter, account director with McGraw Wentworth and the survey leader.

The expected 7 percent increase in costs is up from a 5 percent increase in 2009.

Nationally, total health benefit costs are projected to increase in 2010 by 9 percent, but cost-cutting is expected to trim that to 6 percent, according to Mercer, a New York-based employee benefits company.

Jerry Konal, a principal in the health and benefits group at Mercer’s Detroit office, said Southeast Michigan companies have taken important steps to reduce benefit costs.

“We are not yet at par with the nation but [are] closer to the norm because more organizations have put in payroll contribution requirements,” in which companies charge employees an increasing percentage of health benefit costs, Konal said. “There also is an understanding between management and labor that the status quo could not continue.”

In 2010, workers are paying an average of 43 percent of total health benefit costs for a median PPO plan, up from 33 percent in 2004, the survey said. In 2009, employees paid an average of 41 percent of total health benefit costs.

For the median HMO plan, employees paid an average 31 percent of total benefit costs this year, compared with 28 percent in 2009.

McGraw Wentworth surveyed 414 Southeast Michigan-based companies. Of the companies, 56 percent employed 100 to 499 workers, 15 percent employed fewer than 100, and 13 percent employed 500 to 999.

In 2010, 92 percent of companies are offering PPO plans and 43 percent are offering HMOs, slightly lower percentages than last year.

While the percentage of PPO and HMO plans offered by employers have declined, there was a 4 percentage point increase in companies using consumer-driven health plans in 2010, to 23 percent of all companies.

But in a major shift of philosophy, employers have decided to increase employee contributions to consumer-driven health plans to an average of $75 per month for a single employee, from $41 in 2009, Alter said.

Consumer-driven health plans combine a high deductible of $2,500 to $5,000 with a tax-exempt health savings account when the funds are used for qualified medical expenses.

“Companies are changing how they structure plans and want to get more of the cost to enroll. Early on, to encourage employees to participate, they offered lower costs. Now employers want employees to contribute more to the costs,” Alter said.

McLaughlan said that after payroll deductions, employers now are paying slightly higher costs for consumer-driven plans, at an average $6,984 per year for single coverage, compared with $6,960 for PPOs.

“Michigan is an anomaly in this respect” with higher consumer-driven health plan costs, McLaughlan said. “Nationally, consumer-driven health plans are the lowest-cost plans.”

Konal said Mercer’s 2009 data show that consumer-driven health plans lower total benefit costs.

For example, total per capita costs for consumer-driven health plans with health savings accounts were $6,393, compared with PPO per capita costs of $8,223.

On the other hand, PPO enrollment increased to 65 percent this year, from 59 percent in 2009. HMO enrollment remained the same at 22 percent.

“The increase in PPO plans is most likely due to the elimination of point-of-service or indemnity plans and migration from these plans to the PPO,” Alter said.

Despite the poor economy, employers continue to invest in wellness programs, with more employers tying achievement of health goals to incentives.

In 2010, 17 percent of employers offered a full wellness program, up from 14 percent last year. An additional 16 percent in 2010 offered a wellness program through a health plan.

Filed by Jay Greene of Crain’s Detroit Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Three out of four children on Medicaid in nine states did not receive all required medical, vision and hearing screenings, according to a new report from the Department of Health and Human Services’ Office of the Inspector General.

The OIG report examined the extent to which children in nine selected states—Arkansas, Florida, Idaho, Illinois, Missouri, North Carolina, North Dakota, Texas, Vermont and West Virginia—received required Medicaid Early and Periodic Screening, Diagnostic and Treatment screenings, a child health benefit for children younger than 21. It found that 2.7 million children, about 76 percent, missed one or more of the required EPSDT medical, vision or hearing screenings, and 41 percent of children did not receive any required medical screenings. And more than half did not receive required vision or hearing tests. Meanwhile, 60 percent of children who did receive EPSDT medical screenings lacked at least one component of a complete screening.

To ensure these children are getting the most from this benefit, the OIG report recommended that the Centers for Medicare and Medicaid Services (CMS) require states to report vision and hearing screenings; collaborate with states and providers to develop effective strategies to encourage beneficiary participation in these screenings; work with states and providers to develop education and incentives for providers to encourage complete screenings; and identify and disseminate state practices for increasing children’s participation in, and providers’ delivery of, complete medical screenings.

According to the report, CMS said it will need “to assess the effect that new data-collection requirements might have on states’ financial resources” and also consider “the difficulty states might have in obtaining data on services that are provided outside traditional provider settings.” The CMS agreed with the other three recommendations, the report said.

By Jessica Zigmond of Modern Healthcare, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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One-quarter of employers expect the requirements that group health care plans extend coverage to employees’ adult children up to age 26 and that they eliminate lifetime dollar limits will increase plan costs at least 3 percent, according to a survey released Thursday, May 20.

The provisions, which generally go into effect in 2011, are among the first plan changes required under the new health care reform law.

Thirteen percent of employers responding to the Mercer survey expect the adult-child and dollar-limit provisions to boost costs by 3 to 4 percent, while 12 percent expect cost increases of at least 5 percent.

On the other hand, many employers expect a more modest impact: Thirteen percent expect cost increases of less than 1 percent, while 28 percent estimate cost increases of 1 to 2 percent.

Thirty percent say they don’t yet know how much costs will increase as a result of complying with the new coverage mandates, according to the Mercer study.

Demographics are a key factor in why costs will vary, said Tracy Watts, a partner in Mercer’s Washington office. For example, employers with young workforces likely would have few employees with young-adult children, but employers with a high number of employees ages 45 to 60 likely would have many young-adult children.

In the wake of the new requirements, some employers already are considering changes to their premium structures. For example, 20 percent said they will strongly consider changing their premium rate tiers. Many employers now have only two or three premium tiers.

In addition, 16 percent are strongly considering boosting the premium share for dependent coverage. Nearly half are strongly considering requiring children above a specified age to certify that no other coverage is available. Under the health care reform law, the adult-child coverage requirement does not apply until January 1, 2014, if the adult child is eligible to enroll in another employer plan.

Twenty-nine percent of respondents said a new 40 percent excise tax on the most costly plans is the reform provision that worries them most. Under the provision that is slated to begin in 2018, a 40 percent excise tax will be imposed on premiums exceeding $10,200 for single coverage and $27,500 for family coverage.

The tax poses a difficult issue for employers with generous plans, Watts said. If they pare coverage, employers will lose a tool that has provided a recruiting edge; but if they make no changes, employers face additional costs.

The survey is based on the responses of 791 employers.

 

 

Federal COBRA premium subsidies would be extended through year-end and employers would have more time to fund their pension liabilities under a tax bill that the House could vote on this week.

Under the measure—proposed by Senate Finance Committee Chairman Max Baucus, D-Montana, and House Ways and Means Committee Chairman Sander Levin, D-Michigan—the 65 percent, 15-month COBRA premium subsidy would be extended to involuntarily terminated employees through the end of the year.

Without congressional action, employees who lose their jobs after May 31 will not be eligible for the subsidy.
The measure, H.R. 4213, also would give employers more time to fund pension plan shortfalls.

Under current law, employers must amortize funding shortfalls over seven years. The proposed American Workers, State and Business Relief Act of 2010 would give employers two alternatives to that schedule.

Under one alternative, employers could amortize funding shortfalls over 15 years for any two plan years between 2008 and 2011.

Under the second alternative, employers would have to pay interest on a funding shortfall for only two of the plan years they choose. After that, the seven-year amortization period would begin.

For example, if an employer chose the latter approach for the 2010 plan year, it would pay interest on the shortfall in 2010 and 2011. Then the shortfall would be amortized over seven years starting in 2012.

Other provisions in the bill, though, would require employers that use either temporary funding schedule to contribute more to their plans if they paid “excessive” employee compensation or shareholder payments. A summary of the actual legislation, which was not immediately available, does not define excessive.

Under a previous version of the legislation, an amount equal to compensation that is in excess of $1 million paid to any employee would have to be paid to the pension plan. If an employer had 10 employees who each made $1.5 million, the employer would have to contribute an extra $5 million to the plan.

The House could vote on the bill this week and the Senate could vote on the plan next week.

 

Buoyed by a resurgent equities market, the value of 401(k) plan account balances has regained ground from the low point just over a year ago, according to a study released Wednesday, May 19.

The average account balance jumped 41 percent to $66,900 as of March 31, up from $47,500 at the end of March 2009, said Fidelity Investments, a Boston-based 401(k) plan administrator and mutual fund provider.

As of March 2008, the average account balance was $65,000, a number that tumbled later in the year as the equities market plunged.

“Over the long run, the tried-and-true strategies work best when it comes to saving for retirement,” James M. MacDonald, president of Fidelity’s Workplace Investing unit, said in a statement.

“Even through all of the volatility of the past couple of years, participants who continued to save in their 401(k) accounts now have a positive return from the start of the downturn in 2008,” he said.

The study is based on a Fidelity analysis of 17,000 corporate plans with 11 million participants.

A summary is available online at www.fidelity.com.