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UltraLink - FOCUS...on benefits
February 2006
Adult Children Get Health Coverage Until the
Age of 30?
New Jersey, Acting Governor Richard Codey signed new legislation into law that will allow employee's dependents to keep coverage under their parents' group plans until the age of 30. This differs from similar initiatives in that it does not raise the age at which an employee's children are still considered dependents. Instead it gives an employee's adult child the right to continue coverage after reaching the age that they would no longer be considered a dependent, which is usually 19 years or 23 years if the child is still a student. The law will also require that the previously "aged-out" children be notified as they have the right to be reinstated. Self-funded employers are exempt because of a provision in the Employee Retirement Income Security Act that pre-empts state laws that relate to employee benefit plans.
There are several requirements for those adult children to have access to their parent's group health insurance plan:
- The child is unmarried and has no dependents of their own
- The child is a resident of New Jersey or is enrolled as a full-time student at an accredited institution of higher education
- The child is not covered under another group or individual health insurance plan
The reason for this change is to expand healthcare coverage to thousands of people who do not have access to health insurance, therefore reducing the amount of uncompensated care provided by hospitals. This in turn would decrease cost shifting to insured patients.
The rules for determining the premiums that would be paid by the adult child's parents or by the adult child would be developed by state regulators. The estimated cost of the premium for an adult child will be between $1,200 and $1,800 a year, which is a lot less than the $4,000 per year typically charged for an individual policy.
New Jersey's largest employer lobbying group supports the law as an alternative to more costly proposals. There are some detractors, though. Those that opt for this coverage may tend to be those that make heavy use of medical services - which could lead to adverse selection. On the other hand, because of the age of the adult children, claims experience should be below average according to Kristine Klepper, A vp with Aon Consulting. Another outcome of this new law may be that employers may opt to self-fund health benefits as to avoid the new requirement.
Source: Business Insurance, January 23, 2006
Limited Health Plans Gaining Popularity
Low-cost benefit offerings called "mini-medical" or "limited-benefit" plans are getting more and more popular and are being used as a way to restrain the rising costs of health insurance. Available as group plans or individual policies, they typically include 10 doctors visits a year, a certain amount of prescription drugs, some lab work or other tests and cost as little as $40 per month.
Currently, nearly one million people have mini-medical plans and some of the plans' biggest sellers are predicting business to grow 20% a year. Although mini-medical plans have been around since the 80's, they are becoming more commonplace as employers are cutting back on full benefits or turning to part-time or contract staff. They are also starting to appeal to a wider group who might otherwise not be able to afford insurance, including the self-employed or freelancers.
This spring a coalition of 10 large employers including, Avon Products, IBM, GE and Sears will be offering several low-cost options to those that are not eligible for regular company benefits including independent contractors, part-time and temporary workers - about 900,000 people including dependents. Some of the biggest names in health insurance are getting into the market including UnitedHealth Group, Aetna, WellPoint, Nationwide Mutual Insurance and Coventry Health Care.
One concern that critics have of the limited-benefit plans is that consumers don't always understand the limitations to the policies including: most hospital care is not covered, or the benefits may be doled out in small increments. Also, annual payouts are often capped at $10,000 which would not cover catastrophic illness. These plans are the inverse of "consumer-driven" health plans and some brokers are selling mini-medical plans as a supplement to the high-deductible plans to cover everyday expenses.
For group plans, employers can, but often don't subsidize the premiums, instead they will contract with a company to sell directly to the employee. This adds to the concern that critics have that the employee may not fully understand what they are buying because they are going in without the guidance of an employer's human resource department.
Proponents of the mini-medical plans say that they provide access to the types of preventative care and medications at a price that people can afford. For example some consumers like Donald Lee say they have few alternatives. In the fall the premium on his family's medical plan shot up to $2,500, and because of his and his wife's diabetes, few other insurers would accept them. He found a truck-driving job that gave him the option to buy a limited-benefit plan for $240 per month. Eventually he would like to buy supplementary catastrophic plan, but this one helps keep his diabetes under control.
Source: Wall Street Journal Online, January 17, 2006
Out with the Old - Explanation of Benefits, In with the New - Health Statements
Traditionally, health insurers send "explanations of benefits" to consumers that really don't explain much about a consumer's benefits or their plan. Now, some insurers are trying something new - health "statements." They aren't always intended to replace the explanation of benefits but are meant to summarize a variety of things including: patients' spending, the status of insurance claims made, how much has been applied to their deductible and how much is in their financial account for health expenses, such as a health savings account. They will look more like a 401k statement.
This is another move towards turning patients into health-care consumers who are aware of their health care expenses, helping them to become discriminating "shoppers." Because employers are cost-shifting, employees are taking on more of the benefits costs. They need to be more educated on what the true costs of benefits really are and how they can better manage their spending. Not only will these new statements summarize the insurance plan usage, they are also a tool to provide tips for saving money on health-care needs.
Although much of this information is available on an insurer's website, it only reaches a select group of people. According to a 2005 Forrester Research survey of 60,000 households, 34% of respondents with access to the Internet said they had visited their health plan's web site in the past year.
Two insurers that are turning to this new strategy are: Humana and UnitedHealth Group. Here is a list of some of the elements that they will be including in their health statement.
- Humana - Quarterly, can be as long as 9 pages, includes such items as: charts and written details on enrollees' benefits spending and claims, lists of phone call made to Humana, and a "personal health-care record" that lists their doctor and hospital visits and drug purchases.
- UnitedHealth Group - Monthly, to "consumer-driven" plan members, includes personalized tips and simple charts for their claims and account balances - in 2006 will be rolling out statements to the rest of their enrollees.
Source: Wall Street Journal Online, January 10, 2006
Ten Strategies for Containing Pharmacy Spending
With pharmacy costs expected to be the fastest growing component of health spending this year, it is time to come up with a plan to curb the increase. Here is some advice from the experts:
- Boost generic use
- Tackle specialty pharmacy
- Promote mail-order delivery
- Educate your employees
- Know how your drugs are being priced
- Reach out to physicians
- Use financial incentives
- Consider coinsurance
- Keep an eye on Medicare Part D
- Integrate your data
For detailed explanations of these 10 cost-containment strategies go to: www.BenefitNews.com.
Source: Employee Benefit News, January 2006
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