How High Is Too High?
Containing the cost of health care is about all companies can do these days. But in Atlanta, that’s harder than ever.
Matt Bolch
September 7, 2007
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Rob Bradford and Scot Armstrong have owned Capital Principles for only three years, but the company
is already on its sixth health insurance provider. While Bradford hopes to keep his company's
United Health Care Choice Plus PPO plan longer than six months, he remains mindful of previous
insurance companies taking advantage of small businesses like his 20-employee company.
"This is my third start-up company, and I'm well aware of health insurance costs," Bradford says. "I'm shocked and surprised that because of our size and geographic disparity it's difficult to find an insurance company that will even return my call."
The business partners bought Capital Principles BAE Systems' State and Local Services Division in 1994. Based in the Perimeter Mall area, the company provides financial and strategic consulting, mainly for government entities, and has a satellite office in Jackson, Miss.
Providers Bradford has worked with quote one rate, and then jack up prices by 40 percent or more after demanding employee physicals. One company promised a price break when Capital Principles' employee count hit 15 but reneged when the company achieved that employment milestone. "Apparently the only way to contain costs is to quit your plan and go somewhere else," Bradford says.
Atlanta hit harder than most
Containing health care costs is about all companies can do these days, modifying benefits, pushing employees toward lower-cost plans and changing the amount of the employer contribution.
According to research from Atlanta-based Mercer Health & Benefits, the total health benefit cost for active employees among Atlanta companies increased nearly 10 percent in 2006 to an average of $7,797 per employee, a figure that's expected to rise another 7.4 percent this year even among companies that make changes to an existing plan or change vendors. Atlanta employers pay more per employee than employers in the South ($7,196 per employee) or in the United States ($7,523 per employee).
"Health insurance plays an important role in the attraction and retention of employees," says David Foster, principal at Mercer. "We don't see a lot of companies saying, ‘Here's some money, go out and buy your own health insurance.' It's quite a burden and a challenge to find the best way to strike a balance to provide the benefit at a sustainable cost."
Increasingly, that balance is being provided through managed care plans such as HMOs, PPOs and POS plans, which direct care to a network of physicians and hospitals that agree to a reduction of fees in exchange for a volume of patients. Co-payments generally are about $20, and tests and procedures are subject to a layer of scrutiny before they are approved.
According to Mercer, in the Atlanta area, 55 percent of employees with health benefits are covered by preferred provider organization (PPO) agreements, 23 percent are in point of service (POS) plans, 15 percent are in health maintenance organization (HMO) plans, 6 percent are in consumer-directed health plans (CDHPs) and just 1 percent are still in traditional indemnity plans.
CDHPs represent the latest effort to cut costs, combining high deductibles with either a health reimbursement account (HRA) or a health savings account (HSA) that's often at least partially funded by the employer to offset workers' out-of-pocket expenses. The use of CDHPs coupled with either an HRA or HSA jumped from 2 percent to 6 percent in the latest Mercer survey.
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Greg Yates, owner and president of Metro Atlanta Financial Group in Alpharetta, sees an increase in clients choosing CDHPs for their employees. Metro Atlanta Financial Group helps companies select affordable group health insurance plans to meet their needs.
Clients are choosing CDHPs that combine individual deductibles of $1,000 or more with an HSA. The employer will partially fund the HSA or match employee pre-tax contributions dollar for dollar up to a certain amount, paid for by the savings such a plan represents over other forms of health insurance.
That money is used to pay for qualified medical expenses in an amount up to the deductible, after which more traditional insurance kicks in to pay for extraordinary expenses. If money in an HSA goes unused, it rolls over to the next year and can be invested and used for retirement planning. A certain amount of money for preventative care is included in the plan.
Yates says employers nationally that offer HSA plans and another type of insurance with a co-pay usually have 40 percent of workers opting for the HSA plan. In the Atlanta market, "We've had 70 percent take an HSA, and 90 percent take it the second year."
A consumer mindset
As the burden of paying for care shifts to employees, a consumer mindset emerges that makes workers question physicians more closely about needed tests, request generics and generally consider the cost of their health care decisions while still having the peace of mind that goes with knowing that catastrophic health care expenses will be handled.
For its nine employees, Metro Atlanta Financial Group offers a consumer-directed, high-deductible health plan with an HSA. "It's the only choice you have here," says Yates, taking the advice he offers his clients. "To soften the blow, you help fund it." Foster says most health insurance plans are developed by the largest companies, which have the clout necessary to negotiate volume deals with health care providers. Those plans then trickle down to medium sized companies before becoming widely available to smaller employers. That's what's currently happening with CDHPs, although the Atlanta market has been quicker to adopt the plans (6 percent) than the South (3 percent) or the United States (3 percent).
"The engagement of members in their own health care is the next big thing," Foster says. " Account-based health care plans are the biggest movers in the market right now."
How we rate
The National Survey of Employer-Sponsored Health Plans is conducted annually by Mercer Health & Benefits LLC. With nearly 3,000 employer participants in 2006, 30 of them in Atlanta, it is the largest and most authoritative annual survey on the topic of health benefit costs. All employers (private and public) with at least 10 employees are included in the survey sample. Results represent about 600,000 employers and more than 90 million full and part time employees, and have an error range of +/-3 percent.
So how does Atlanta stand compared to the rest of the region and the nation when it comes to employer and employee health care costs?
Atlanta employers (30 surveyed employers)
- The average employee contribution amount for employee-only coverage is $95 monthly for a PPO and $76 monthly for an HMO.
- 55 percent of employees covered by employer health plans areenrolled in PPOs, 15 percent in HMOs, 23 percent in POS plans,1 percent in traditional indemnity plans and 6 percent in CDHPs.
South region employers (with 10 or more employees)
- The average employee contribution amount for employee-only coverage is $112 monthly for a PPO and $102 monthly for an HMO.
- 68 percent of employees covered by employer plans are enrolled in PPOs, 19 percent in HMOs, 7 percent in POS plans, 2 percent in traditional indemnity plans and 3 percent in CDHPs.
U.S. employers (with 10 or more employees)
- The average employee contribution amount for employee-only coverage is $98 monthly for a PPO and $95 monthly for an HMO.
- 61 percent of employees covered by employer plans are enrolled in PPOs, 24 percent in HMOs, 9 percent in POS plans, 3 percent in traditional indemnity plans and 3 percent in CDHPs.
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