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Benefits Business Politically driven health plan changes coming Both employees and employers seek changes in benefits system By Len Strazewski If you just earned your Certified Employee Benefits Specialist (CEBS) or other employee-benefits related certification, don’t become too complacent. The business of health and retirement benefits is always changing, and the pace is about to accelerate to warp speed. The good news is that there should be plenty of potential for consulting and policy marketing activity for agents and brokers. The bad news is that the shape of employee benefits is likely to change dramatically, demanding constant re-education and training. After more than 10 years of staying beneath the radar of national politics, health care, health insurance plans, and the millions of uninsured Americans have become national issues again—driving 2008 presidential campaigns and legislative agendas. And retirement issues, including the future of Medicare, Social Security, the cost of long term care and prescription drugs, are following close behind. What’s driving this historic movement? Recent surveys of employers, their employees and average Americans indicate that while the forum for debating change may be political, the motivation is a general dissatisfaction with the way employee benefit plans have been evolving. According to a recent survey of both employers and their employees conducted by Towers Perrin in Stamford, Connecticut, neither executives nor workers are satisfied with their employee benefits and how they meet business or personal goals. When the human resource and employee benefits consulting company polled 140 human resources and employee benefits managers and about 2,400 employees, the results revealed a general lack of confidence in health care and retirement benefits and confusion over the future of their respective roles in providing those benefits. Among executives, less than half of respondents (46%) said their employee benefit programs meet business objectives for recruitment and retention, usually cited as among the most critical goals for business organizations. Only about 25% of executives said their employee benefit plans were meeting their cost control objectives. As a result, employers say they continue to plan changes. More than 80% of executive respondents said they have made significant changes in their plans in the past two years, and 90% said they plan to review or modify their plans in the coming two years—primarily to control costs. The poll also indicated that employees aren’t happy with the changes they’ve seen so far. More than 40% of employee respondents said the recent benefit changes negatively affected their confidence in management, and 23% of respondents said their benefits could affect their intention to stay with their employer. About one-fourth said their motivation to do a good job had been diminished by employee benefit plan changes. Health care is the most disappointing and the most immediate target of change. In late March, Americans for Health Care, a project of the Washington-based Service Employees International Union, released its own poll of 1,600 political primary voters in New Hampshire, Iowa, South Carolina and Nevada. They were asked their opinions on the health care system. More than 80% of all respondents agreed that “everyone has a right to quality and affordable health care” and more than half (55%) said health care will be the most important or one of the most important issues in their voting decisions. Democrats and Republicans overwhelmingly agreed that the system needs an overhaul. Nearly 90% of Democrats and about 70% of Republicans agreed that, “We need to move beyond piecemeal reform because our health care system needs to be fundamentally overhauled.” Health care is generally considered by voters to be the second most important political issue of the day, behind the war in Iraq, but the top pocketbook issue for both Democrats and Republicans, ahead of higher taxes and retirement security. “What we found in this poll confirms something that we have known for a while: Voters consistently place health care among their top concerns,” said Andy Stern, president of SEIU. “And rising health care costs are continuing to hit workers where it hurts.” Seven of the Democratic presidential candidates appeared at a SEIU-sponsored forum in Las Vegas on March 24. While the candidates differed on approaches and only John Edwards presented a formal health care reform program, all of the candidates agreed that health care coverage should be universal, the system should invest more in prevention and chronic illnesses, and the government should create insurance pools for risk-sharing and cost reduction. Edwards’ plan would require that employers provide health insurance for their employees or pay into a government program to provide coverage for the uninsured. Once the programs are in place, then he would seek to require by law that every individual have heath insurance. Edwards says the program would cost $90 billion to $120 billion, funded by employer payments and changes in tax breaks for highly paid individuals. The candidates’ ideas are already controversial and in most business circles are considered radical. James A. Klein, president of the American Benefits Council in Washington, a trade group representing the employee benefits industry, agrees that a major overhaul of the health care system is “imperative,” but he advises against “extreme solutions” that include government control of the health care system. He recommends more incentives and wellness programs to promote more healthful lifestyles and better evidence-based performance standards for health programs. In addition, Klein calls for modification of employee benefits law to allow the creation of more flexible and affordable health plan choices free from state or federal mandates. Expect smaller scale changes to health care as well. By 2011, generic drugs replacing more than $50 billion in brand name drug sales will be approved by the U.S. Food and Drug Administration, according to pharmaceutical industry sources. The drugs will be the generic equivalents of popular prescriptions for hypertension, depression, allergies, and acid reflex, among others. This development will have a big impact on pharmacy benefit carve-outs and the structure of employer prescription drug benefits. Because generics cost 20% of the retail cost for their brand name equivalents, they could be critical to controlling drug costs—if plan sponsors can structure the benefits to encourage better generic utilization. Generics may also get another boost from Congress. In February, Rep. Henry A. Waxman (D-Cal.) introduced the “Access to Life-Savings Medicine Act,” which would give the FDA the authority to approve generic equivalents of biotech drugs grown from cell cultures. The bill was also introduced in the Senate by Sen. Hillary Clinton (D-N.Y.). When the FDA was granted the authority to approve generics in 1984, these drugs had not been conceived and were not included, but today they are a fast growing category of prescription drugs and among the most expensive—costing patients tens of thousands of dollars a year, Rep. Waxman says. “I believe that this bill will lead to healthy competition and long-term savings for patients,” he said in a statement to Congress. Employee benefit consultants are recommending plan design changes, including lower or sometimes zero dollar co-pays for generic drugs and higher co-pays for brand name drugs in the traditional three- or four-tiered pharmacy plans, as well as more complicated “step therapy” to restrict unnecessary prescribing of more expensive drugs. That’s just the story for health care changes. More on prospective changes in retirement benefits in a future column. * The author |
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