By now you're more than familiar with the cost arc of providing Medical Insurance to your employees - it's doubled in the last decade, and while the annualized trend is down (6% projected for 2009, down from the glory days of 14% in the early 2000s), costs are still going up, not down.
Here's a comment that's been oft repeated in your local benefits group - "if I could just charge the people who use the plan more, my costs would be more in line." It's a tough spot, because the other option - increasing employee contributions that are deducted directly from the paycheck - isn't a great option from an employee relations standpoint.
As it turns out, companies are charging the heavy usage employees/families more, but not by identifying the unhealthy - which has legal and privacy ramifications - but instead by jacking up the deductible level.
The median deductible for a garden-variety PPO is now over $1,000 according to Mercer:
"The median deductible required by employers for individual coverage in PPO health plans jumped to $1,000 in 2008, up from $500 last year, according to the National Survey of Employer-Sponsored Health Plans , conducted annually by Mercer and released today. In 2000, only about half of employers imposed a deductible for PPO coverage (compared to about four-fifths today), and when they did the median amount was just $250. PPOs are the most popular type of health plan, enrolling 69 percent of all covered employees."
A couple of important notes. First, the Mercer numbers represent normal traditional PPOs – not the high-deductible health plans where a deductible of at least $1,100 is required in order to deposit tax-free money in a Health Savings Account, or HSA. So, it's the normal type of PPO, not a consumer-driven model, that we're talking about here.
The Mercer numbers show that raising the deductible is really the option of choice, if you are seeking to tax the heaviest users for usage of the medical plan. But, like raising employee contributions that are deducted from the paycheck, there's an employee relations cost spread across all employees (heavy users and low users) that goes along with either option related to the perception of diminished value of your medical plan.
Final note - in 2000, about half of employers required no deductible for PPO coverage. Doesn't that seem like decades ago?
