There are opposing forces at work that are confounding attempts to forecast 2010 employer health care budgets in the hospitality industry. Meanwhile some reliable cost-saving methods may be going begging.
Let’s consider a few of these forces on your hotel’s 2010 health care planning and what you can do to address them.
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Charles A. Conine
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Force No. 1: The uncertainty employers are experiencing over whether to make changes in their health care plans while Congress debates reform measures is costing employers money. According to a September 2009 report by TowersPerrin, more than 40 percent of 433 human resource executives interviewed were either rethinking or postponing planned changes to their health care offerings, willing to “stay the course” while awaiting the final health reform package. The same study, however, found 59 percent of the surveyed employers said they are not considering possible impacts of reform (i.e., they are proceeding with plan changes as they deem necessary).
What to do: Waiting may not make sense. Who knows? Congress may not even pass health care reform this year—or next. Some of the reform changes might not take effect until as far out as 2017. What current savings are you willing to forego while awaiting the unknown effects of reform? For 59 percent of the TowersPerrin respondents the answer was “none.”
Force No. 2: Layoffs and reductions in employee hours, and the resultant loss from health care plans of prized healthy enrollees—their contributions and lack of claims render them “net contributors” to these plans—means more plans will see a lopsided enrollment of “net spenders” and a corresponding unfavorable impact to their plan’s cost experience, including the potential weakening of the plan’s fail-safe device, its reserves.
What to do: The goal here is to at least retain, but hopefully to improve the percentage of “net contributors” to your health plan. How? This is a tough one. It sounds counterintuitive, but one remedy enacted by some employers has been to temporarily reduce their plans’ “minimum hours worked” requirement so as to allow employees affected by a reduction in working hours to maintain health coverage. This essentially eliminates, at least for now, the healthy employee’s need to consider or decline your COBRA coverage. If the healthy employee remains on the plan, so do his/her favorable demographics. The idea is not without risk; your plan could keep some expensive participants on the plan as well but, depending on your specific situation, it may be an idea worth considering.
Force No. 3: The cost of prescription drugs continues to rise. Illustrating the problem: In a recent story, The New York Times reported that drug manufacturers, apparently anticipating price controls as a result of health reform, have quietly increased the wholesale prices of non-generic drugs “by about nine percent,” a move the article’s author suggests is “distinctly at odds” with the nation’s Consumer Price Index, which fell 1.3 percent in the last year. Elsewhere, a joint study from the University of Minnesota and the American Association of Retired Persons concluded that the wholesale cost of several commonly used brand name Medicare-covered drugs has risen 9.3 percent since September 2008.
What to do: Employers provide drug plan benefits through a variety of mechanisms, with many simply subscribing to an existing national drug plan’s program. These programs are not cast in stone, however; employers can specify that the drug plan’s standard “formulary,” the list of drugs its plan offers, be modified to match, for example, your preference for offering generics wherever possible. Another approach is to adjust the rates at which you will reimburse covered employees for drugs purchased, providing a significantly higher percentage reimbursement for generics (this can be achieved through adjusting a drug’s co-pay, meaning the cost borne by the employee for each prescription filled). To cite but one example of the purchasing power employers gain by favoring generics, a popular diabetes brand name drug, Glucophage, currently costs about US$150 for a two-per-day, 90 supply. The medication’s twin, its generic equivalent, is available in the same dosage in at least one national drug store for US$12 (provided you purchase a US$20 annual pharmacy club membership, that is). Generics are cheap. Why spend more needlessly?
Force No. 4: Errors in paying health and prescription claims can go unchecked. While virtually all health plans employ quality control measures to guard against waste—duplicate payments, for example—these safeguards are far from foolproof. Yet employers do not always take the next step which, in a self-insured employer’s world, means engaging a firm to complete a retrospective health and prescription claims audit. The minimal effort required of the employer to source the auditors and provide contact information for your plan administrators is more often than not well-rewarded.
Some people would call this found money. Perhaps, but at the time the money went astray, it was, just as with the other impact areas cited here, yours—and it could be once again.
Chuck Conine is a 35-year veteran of hospitality human resources and risk management, a graduate of Cornell University’s School of Hotel Administration and a certified Senior Professional in Human Resources. He provides hotel employers advice through Hospitality HR Solutions. Write Chuck at: chuckc@hospitalityhrsolutions.com
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