Human Resources and Benefits

The 5 P’s of Health Insurance

By Derek Moore, Leavitt Group

As an employer, what is the most important part of the employee benefits plan you are providing your workforce?  Like most employers, you are probably caught between the balance of providing a benefits plan that is affordable for both you and your employees while at the same time including enough options in the plan to meet the needs of your employees and their families.  This article outlines the “Five P’s of Insurance” that I discuss with my clients when designing group benefits plans.  The five “P’s” include premium, plan, providers, participation, and performance.  Consider these five elements of benefits design and rank them by importance.

01 Premium

Premium is the cost the employer pays for the benefits plan on behalf of the employees.  Low cost is often cited as the top priority by employers when designing a benefits plan.  However, it is important to understand that with lower premiums come less options in the plan design and providers (see sections below for further details on plan design and providers).  In addition, a lower-priced plan with fewer providers and less options may also equate to less participation from employees.  To help keep costs affordable for both the employees and the employer as well as to provide adequate plan options, many employers actually offer different tiers of health plans.  The employees are able to choose the plan that fits their budget and best meet their needs.  In the case of offering multiple tiers, the employer generally contributes a flat amount of money for the plan per employee, and the employees pay the difference if they choose a higher level plan with more options.  This helps keep costs manageable and helps an employer know ahead of time what the end cost will be, even without knowing what plan option each of the employees will choose.

02 Plan

How comprehensive do you want your plan to be?  The plan design outlines the yearly deductible as well as the employees’ cost (co-insurance) for office visits, prescription drugs, hospitalizations, etc.  When trying to cut costs or improve participation, the plan design and providers are generally where the changes occur.  For example, an employer trying to cut costs on the plan design may choose a reduced coverage for hospitalizations.  Instead of being covered for 80 percent of the hospitalization costs, the employee is now only covered for 70 percent (meaning they pay 30 percent of the cost).  Or, instead of $10 office visits, the office visit may  be increased to $30.  The coverage is often diluted to save costs.  However, if participation in the plan is an area of higher priority for the employer, the plan design may need to be enhanced to aid in boosting participation.

03 Providers

How important are your providers to you?  Providers are the doctors and health care providers that are considered “in-network” on your plan.  The trend we are seeing in 2014 plans is that many of the insurance carriers are scaling back on the providers in their network.  The plans look good, the premiums are acceptable, but the number of providers has decreased significantly within the networks.  When the providers are cut back significantly, this creates an issue for your employees because they may not be able to see their doctors and health care providers since they are no longer part of the network.  This demonstrates the importance of looking at all five aspects of benefits design (the five “P’s”).  When you cut back on one element, it may affect another part of the plan.  Cutting back on providers to save on cost may affect participation.

04 Participation

With the health care reform regulations that are taking effect in 2015, participation is going to be a bigger issue to some sectors that have historically had low participation (including restaurants, hospitality, auto dealers, and nursing).  In some cases, employers have only offered one plan.  Often the plan is a really nice plan with great benefits and options.  However, it is too much for the front-line staff to afford.  The executives might be able to afford it, but participation is low among the rest of the employees.  In order to increase participation, you will need to offer a plan with more affordable premiums, but the plan design may not be as rich as what you have offered in the past.  Offering a more affordable plan will help increase participation among your employees who haven’t been able to participate in the past and will help ensure you are meeting the affordability requirements of the Affordable Care Act.  To meet the needs and desires of a variety of employees, you could consider offering two or three different tiers of plans (as discussed in the “premium” section of this article).

05 Performance

There are several performance indicators to consider in determining how well your plan is working:

  • THE PERFORMANCE OF YOUR INSURANCE BROKER.  Is your broker following through with commitments they made to you?  Are they communicating with you and helping to ensure you are in compliance with health care reform requirements?  Is your broker helping you to understand all of the benefits of the plan you have in place?
  • THE EFFECTIVENESS OF THE BENEFITS COMMUNICATION STRATEGY.  Are the benefits being communicated to employees through appropriate venues and in a manner they can understand?  Make sure to communicate the plan to employees through venues they have easy access to.  In some industries, employees have easy access to their email and the benefits website as they are working at a computer all day.  In this case, email notifications may be effective.  In other industries, employees don’t use computers for their job so payroll stuffers, postcards, or notices posted in break rooms may be more appropriate.  Every carrier has their own website with information on the plans you are providing.  However, don’t just send your employees to the website and expect them to filter through the expanse of information they find there.  Provide the website as an option, but supplement this with simple communications that clearly outline the basics.  For example:  “Free flu shots on Friday in the conference room” or “Low cost prescription refills available at ABC Pharmacy.”  Keep your communications simple, clear, and consistent.  Also, target your information to the groups it applies to – don’t just send a blanket message to all employees.  If one of the benefits options applies only to a specific group, just send that group the message.
  • THE ENGAGEMENT LEVEL OF YOUR EMPLOYEES IN THE PLAN:  Are your employees utilizing all of the benefits of the plan?  Engagement is more than just having a plan in place.  If the employees aren’t familiar with all of the benefits and if they don’t know how to take advantage of these benefits, your plan performance will be lower than it should be.  As part of your communications strategy, inform your employees of options such as free preventative care, mail-in order pharmacy, and health and fitness tips and support available on the plan website.  Encourage your employees to maximize the benefits that are available and take care of their health.  Rather than just helping employees when they are sick, benefits plans actually aid in health maintenance when they are utilized effectively.

By considering the five “P’s” of insurance and ranking these items according to their importance to you, you can design a plan that meets the needs of both you and your employees.  To learn more about designing a benefits plan that works for you, please contact your Leavitt Group insurance consultant.

Derek Moore joined the Leavitt Group in 2012.  He has over 16 years of experience in the health insurance industry.  Derek focuses on employee benefits for the energy, trucking, and restaurant divisions.