Health-Care Reform Warrants HRIS Updates

By Thurston, Robert J.; Jones, Jeffrey R. | Personnel Journal, May 1994 | Go to article overview

Health-Care Reform Warrants HRIS Updates


Thurston, Robert J., Jones, Jeffrey R., Personnel Journal


No one knows what will happen to health care in the future as a result of health-care reform. There's no doubt, however, that something will happen. Changes to flexible benefits are expected by January 1, 1997, and full health-care reform should be in effect the following year.

Although 1998 sounds far off, companies must begin now to prepare their HR information systems (HRIS) to effectively manage their companies' health-care programs through the changes that will occur. Businesses must have the ability to collect and analyze health-care data. On top of that, the health-care system as proposed by President Bill Clinton requires a linkage between organizations, their health-care providers and insurance companies.

Even without legislation, health care is transforming, requiring changes in HRIS. Employers who historically offered workers maximum choice in health-care via indemnity plans no longer can afford to stay on this path. With rising health-care inflation, more choice in medical care means more cost. As a result, employers, unions and employees voluntarily have been changing their purchasing behavior.

This has caused a fluid movement from indemnity plans to health-maintenance organizations (HMOs) and other managed-care strategies that offer less choice. Since 1985, the growth of HMOs has been astounding. If companies continue along this continuum, no worker will have a totally free selection of doctors or providers within the next few years-managed-care strategies will be the norm for most plans. As this trend continues, IS must keep pace by tracking usage, costs and other factors that affect the bottom line.

Adding legislation would mean additional tracking. Reform as proposed by the Clinton administration would require all companies with fewer than 5,000 people to participate in regional health-care alliances. Through strong lobbying, however, the legislation that eventually passes may require only companies employing fewer than 1,000 workers to join regional alliances. All others may have the option of joining corporate alliances (in which several organizations align together) or continuing whatever coverage they now offer. Companies that employ more than 1,000 people, therefore, will need to have almost instantaneous feedback to their benefits and medical-utilization data if they don't wish to join a regional health-care alliance.

Health-care reform will affect other elements as well. Although flexible benefits covered under Section 125 of the Internal Revenue Code will survive, there will be his changes in basic plan design (see "Flexible Benefits That Will Survive Under Health-care Reform," page 46). Health-care reform actually may be a catalyst for growth in flexible-benefits plans. However, medical flexible spending accounts (FSAs) likely will be eliminated by January 1, 1997, for almost all types of health-care reform expenses. Medical FSAs will be limited to out-of-pocket dental, vision and hearing expenses with some type of spending cap.

A cap or overall limit on the amount of money allowed pre-tax in a flex-benefits plan is the next debatable issue. Most consultants feel that having a cap is inevitable. Most employers, however, would like to see no cap and are fighting to preserve the tax-deductibility of employee benefits.

The Republican Party has sent up a trial balloon proposal similar to a medical FSA. It's called a medical IRA (for its similarity to an individual retirement account), and it allows putting away pre-tax money for any type of health expense. If the money that's been set aside isn't used by the end of the year in which it's been earned, it can be carried forward. The medical IRA will allow employee choice and preserve the tax-deductibility of employee benefits (see "Medical IRAs Replace Current Flexible Spending Accounts," this page).(Omitted)

REFORM REQUIRES UPDATED HRIS.

All of these changes will require HRIS personnel to alter their current practices and technologies. …

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