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Lucas Group – A Consumer-Driven Health Care Case Study

June 27th, 2008 Posted in Benefit Plan Design, Business Insurance, Consumer Driven Health Care, Health Insurance

We just wrapped up open enrollment meetings for Lucas Group, an Atlanta-based executive search firm. Effectively informing four hundred employees who are spread throughout the United States of their employee benefit plan choices is a daunting task, but one that went extremely well.

The highlight of this year’s benefit offering was the addition of a Health Reimbursement Arrangement (HRA) to Lucas’ existing medical plan choices (High Deductible Health Plan / Health Savings Account (HDHP/HSA or HSA), HMO and Point-of-Service plans).

Strategic planning

Six months ago we began the planning process that culminated in the employee meetings last week. Kelly Stewart, Lucas’ new Director of Human Resources, had arrived with some fresh ideas and had been given a directive to explore instituting a “wellness program.” Kelly handed me an advertisement boasting 26% premium savings for installing a wellness plan.

Common sense dictates that if you quit smoking or lose 50 pounds today (both great things) the result will not be a near term reduction in claims costs (and therefore a reduction in premium costs). So, in my opinion, installing a “wellness plan” has been a smokescreen used by other employers to reduce company-paid benefits. And, reducing benefits was certainly not Lucas Group’s goal. We did, however, want a program that would reward healthy lifestyles. Enter consumer-driven health care.

Consumer-driven health care

With a consumer-driven health care plan there is that a fund of money available to an employee to spend on medical expenses; the idea being that the employee will be a better, more informed consumer given it is his or her own money on the line. HRAs and HDHP / HSAs both fit in this category. Here is a brief summary of the differences:

Contribution schedule adjustments

So why would an employee sign up for a plan with higher patient costs (deductibles and coinsurance)? Simple! Because the premium rate for that plan was lower than the alternatives. For this policy year, Lucas Group pays 100% of employee premiums and 60% of dependent premiums for the HRA plan and a slightly lower percentage for the HSA product. That is strong!

Here is a quick comparison of the group’s HMO plan vs its HRA plan for an employee with relatively low claims:

As you can see, a person with a low claims history has a wonderful opportunity to save money under the HRA plan. And, employees who may have higher claims cost still have access to an excellent suite of traditional health plans.

Open enrollment process

In years past, employees would have to fill out hard copy forms and submit them to HR for processing. The burden of this fell directly on the capable shoulders of Lisa Stewart, the HR consultant at Lucas Group. This year we decided to take advantage of an on-line enrollment tool offered by the medical insurer. While there was considerable more work involved on the front end the result has been fantastic. Here are the steps we went through:

• Obtained a data dump from the insurer and created an individualized benefits statement for each employee showing their current election. This was e-mailed to each employee a couple days before the open enrollment meetings along with a summary of our open enrollment presentation.
• Held a series of conference calls with the entire employee population to explain the differences between each medical plan choice, the employee premium cost, etc. A great question and answer session followed each presentation.
• Provided the employees with instructions on how to log into the insurers computer system and make their benefit elections.
• Once the deadline for employees to enroll is reached then the insurer will upload the enrollment data file into its system thus avoiding the work Lucas’ HR department had done in past years.
• Our office will get another data dump from the insurer and prepare an individualized benefits statement for each employee as a confirmation of their elections for this new policy year. These will be e-mailed to each employee in the coming weeks.

Open enrollment results

Last year only 11% of Lucas’ employee population was covered by a consumer driven health care plan. Given the commitment to such plans – both in terms of employee education and employer premium contribution – we were pleased to see that 23% of the population enrolled in consumer driven health care plan for 2008 – 2009.

We added eighteen new employees to medical insurance – that is eighteen more associates who value the Lucas Group’s efforts to retain their services.

Finally, we had about a 100% increase in enrollment in the voluntary life insurance program. This is directly attributable to the ease of the on-line enrollment process.

Conclusion

Consumer-driven health care plans are not for every employer – and are certainly not appropriate for every plan participant. They are, however, one more tool that can be used to build a responsive benefits package that will attract and retain employees. Re-evaluating the employer contribution schedule is an integral part of installing these products. And, finally, effectively communicating to employees their plan choices goes a long way in having employees better appreciate the value of the benefits offered by the employer.