Firms Cut Choices in Health Care Plans: Most Employees Face Take-It-or-Leave It Decision
Goldreich, Samuel, The Washington Times (Washington, DC)
When local federal employees arrive at work next week most will be inundated with brochures, flyers and other literature from health insurers.
More than 20 plans will pitch coverage to the army of bureaucrats, who make up about half of the region's employment base. But most private sector workers are not so lucky.
Despite business group insistence that the free market offers the best choice of health insurance, that luxury doesn't exist for more than half of people nationwide who depend on private employer-sponsored health insurance. Most companies that have dropped traditional fee-for-service health insurance that lets people choose doctors without restriction do not provide employees with managed-care options.
The same situation exists in the Baltimore-Washington region, where a recent survey shows that fewer than one in five private employers provide their employees alternatives.
For most workers, that means they have the choice of a take-it-or-leave it health plan.
Waveworks, a video and audio post-production firm based in Arlington, is typical of the 96 percent of small local businesses that offer only one choice.
"It's a growing expense on the cost of personnel," that the company can't control if it offers more options, said Waveworks President Jim Harmon.
Waveworks provides its 35 employees coverage under a preferred provider plan, or PPO, run by Virginia's Trigon, a for-profit Blue Cross licensee. PPOs - a hybrid of a health maintenance organization, or HMO, and traditional insurance - charge members a higher co-payment or deductible if they go outside the network for treatment.
The District, Maryland, Virginia and nine other states require health insurance companies to offer employers a choice of coverage options.
If a company wants to market a HMO, which requires patients to choose health-care providers from within a network, in this region it also must make available a point-of-service plan. These so-called POS plans allow members to choose doctors and hospitals from outside an HMO network in return for lower levels of coverage or higher premiums.
But no local government requires that employers pass along that option to employees.
The result is that only 16 percent of companies of all size in the Baltimore-Washington region offered workers more than one health plan last year, according to Rand, a think tank, which conducted a survey of 21,000 employers nationwide for the Robert Wood Johnson Foundation.
The picture is only slightly better nationwide, where only 17 percent of all employers provide a choice and 59 percent of all workers have no alternatives but to accept their company-sponsored plan.
But even a single-option plan creates administrative and cost headaches for employers, especially small businesses like Waveworks, which expects revenues to approach $5 million this year, Mr. Harmon said.
"Every couple of years a small business has to go out and do an analysis and re-evaluation of its health insurance," he said. "The insurance companies get you on a sort of bait-and-switch basis. For a year or two the rates are good. Then, all of a sudden, you face a 30 percent rate increase."
Small employers don't have the buying power to negotiate, said Rand's Susan Marquis.
"There are so many small employers in the area and it's difficult for them to offer a choice unless they're part of some sort of pooled arrangement," she said.
The lack of choices has undermined the theory that "managed competition" between health plans can improve health quality and prices, Rand reported.
But Paul Fronstin, an analyst with the Employee Benefits Research Institute, said competition has grown as health plans have tried to undercut each other's premiums.
"Health plans have been competing for years and that's why prices have been so low," he said. …