DC HealthPlans

[Guest melinda]

Does anybody know anything about DC healthplans? Are they similar to regular 401k plans as far as adminstration? Where would be a good source to find information about DC Healthplans. Thanks

[GBurns]

While the majority of articles are more advertorial than not there are a few that really explain the pros and cons. There are mostly cons especially from a tax perspective. Here is a good recent article written by one of the people most qualified to write such an article.

http://www.groom.com/articles_display.asp?display=161

Aside from the fact that the IRS has long refused to rule on one of the aspects on which such plans rely there is also additional clear law that would give even a risk taker cause for concern.

Here is another article.

http://www.benefitnews.com/subscriber/Arti...cfm?id=37880462

In some plans there are also state insurance law issues that have to be considered and which are not in these articles.

In my opinion there are too many unanswered questions to make these plans viable.

[mroberts]

Given the current state of the managed health care systems, I am actually a proponent for the DC Health Plans. While I agree that the tax issue is in the limbo, there are many signs pointing to the fact that the government will shortly endorse them. Additionally, Bush is high on the idea of medical spending accounts, which DC Health plans are really based off of. If you would like to discuss further, drop me an email.

[GBurns]

Considering that last year the IRS moved the issue from an item that was under extensive review to an item that they will not rule on, what and where have you seen signs of them endorsing any aspect of the tax issue?

See Section 3 of Revenue Procedure 2002-3. For the historical No-Rule position on these issues see the 3rd Rev Proc of any year since 1989, eg 1999 is Rev Proc 1999-3.

Even if the tax issues are resolved favorably there are still the state insurance law issues that affect a large number of the plan designs.

Then there are the issues of adverse selection which would affect renewals and the issue of whether or not they really are of benefit or danger to employees when they eventually have more than minimal medical expenses or worse have the MSA money in investments that "melt down".

There are too many "ifs" and "maybes" for my liking, especially since most of the plans have not even had a full calendar year of experience or rate renewal, and yet there are horror stories already surfacing.

[mroberts]

It's through benefit experience, a thorough understanding of the plans and just normal every day things I read in the newspaper that I base my opinion. I indicated that the tax issue is not clear as day when it comes to these plans, but the pros clearly outweigh the cons. If these plans weren't going to come to fruition, would Humana, Atena, BCBS, CIGNA and every other big carrier be designing them for rollout in the not so distant future?

These plans are obviously not something you just throw out there and not endorse if you are an employer. It takes a lot of work to communicate it properly. Additionally, employers who are offering these plans to their employees are not simply saying this is the only plan, take it or leave it. A DC health plan is usually offered side by side with other health plans. It's necessary for a natural and gradual transition.

Most of these plans are based off of a self-insured model as well, which basically means you need to have at least 300 employees before you consider it. There are some companies that work this product off of a fully-insured platform, however, they are usually only filed in a couple of states and probably would not be a great fit for a large firm.

Employers really need to take a look at these plans and the sooner the better. How long are we going to be able to continue to absorb 10 to 15% increases on our health insurance?

[GBurns]

Now all of this raises the question of, What is a DC health plan?

There seems to be no definition.

The Aetna and Humana models are very different from the Definity which is different from the Vivius which is different from the "fixed Benefit amount" used in the Benefits Credit approached long used by many employers.

Melinda..... What do you mean by DC ? Is there a particular version that you are seeking info on?

[Greg Judd]

Originally posted by GBurns

Melinda..... What do you mean by DC?

GB's marked the best place to start; by unwrapping the marketing labels from what's really going on ( & isn't that the best place to start talking about any insurance contract? )

I can't supply a good starting block, but "employees pay a much larger share of the first dollars of charges for covered health treatment" seems common to all things labelled 'DC health plan'.

The differences lie in what kind of mechanism (or mechanisms) are put in place to help employees with the paying those first dollars of charges and/or minimizing their sting (by 'better' choices of healthcare providers, whatever that might mean).

[mroberts]

A lot of the companies prefer the health plans to be called consumer driven rather than DC for just that point on clarity. The basis for almost all of them is a medical spending account usually funded by the employer. After this account has been exhausted there is a corridor in which the employee will have to spend some out of pocket dollars before major medical kicks in and the rest is covered. I think it's a great idea - the people who use the medical benefits most pay for them. And as far as the opponents of these plans go, no they don't pay a lot. Usually less than most PPO plans that are out there.

There's going to be a lot of opinions on it and yes, you could say that forcing employees to be consumers on medical is not going to work. But you know what? It's going to have to unless we turn to a government run medical program. Right now most employees have no idea of the true costs associated with visiting a doctor. They really think it costs $5 or $10 rather than the real cost of $100, $200 and more.

[Greg Judd]

Originally posted by mroberts

A lot of the companies prefer the health plans to be called consumer driven rather than DC for just that point on clarity.

Clarity being in the eye of the beholder in this case Ask employees if they don't instinctively flinch nowadays at phrases like 'consumer-driven'....

After this account has been exhausted there is a corridor in which the employee will have to spend some out of pocket dollars before major medical kicks in and the rest is covered.  I think it's a great idea - the people who use the medical benefits most pay for them.

In the 'everything old is new again' department, corridor deductible plans were employed in the early days of individual & group plans that went beyond hospitalization benefits. Regardless one's feelings about the validity of the famed RAND study, it's hard to dismiss the notion that decisions to spend one's 'own' $ make one a more vigilant shopper - if not necessarily a more effective/efficient one.

Right now most employees have no idea of the true costs associated with visiting a doctor.  They really think it costs $5 or $10 rather than the real cost of $100, $200 and more. [/b]

truer words cannot be spoken on this subject. I've always been fond of stacking up 'gotta have' frivolities like monster-screen tvs against outlays health plans require. These days, the healthcare industry makes that easier - merely stack the charges for 'medical treatments' like lasik, liposuction, or botox against deductibles/copays for health-preserving/restoring treatments.

[GBurns]

mroberts,

I dont think that you quite understand what Gregg or I mean.

"And as far as the opponents of these plans go, no they don't pay a lot. Usually less than most PPO plans that are out there."

This implies that you are regarding the DC plans as being an alternative to PPO plans etc.

To most of us DC plans are alternaive funding methods for whatever health insurance provision method that is used not plans themselves.

Regarding employees not knowing the costs etc. That really should be corrected by education including employee benefits statements, disclosures at open enrollment etc and not through a "plan" that they do not understand and which the industry still cannot define much less understand.

If benefits people and insurance providers habe not yet understood, How can you expect the employee to understand?

[mroberts]

I was simply trying to compare DC health plans to something that we do know a lot about.

The only way to help employees understand is through education, education and more education. As I indicated in one of my previous posts, this is not an overnight process, but it's a process that needs to begin now. The fundamental idea of here's $2000 you can spend any way you want on medical services is not overly complex at all. It's called a budget.

Of course it's difficult to understand if you haven't had an expert come in and explain it to you. Once that occurs, it's not as complex as you're making it sound. Does it put more of a burden on the employee? You bet. Do employees who switch to the DC plans like it? Overwhelmingly yes. We all have a fear of things we don't completely understand. Once we understand it, it's not overly complex. Sort of like indoor plumbing.

Now, is this plan for all companies? Of course not. Larger companies that have many employees in one location are best, but it depends on the industry as well.

[Guest melinda]

Thanks to all who have answered. To G Burns, Defined Contribution Health Plans.

[Greg Judd]

Originally posted by mroberts

 Do employees who switch to the DC plans like it?  Overwhelmingly yes.

Brings to mind the recent EBRI research that revealed while employees enrolled in managed care plans overwhelmingly gave high quality marks to the health plan they 'participated' in, significantly fewer than half understood they were, in fact, enrolled in a managed care plan (!)

[mroberts]

A huge reason employees love DC health plans is because there are no networks and no managed care. Remember the doctor who treated your entire family and that you no longer go to because he's not in your network? This is no longer a problem. Better yet, if you needed brain surgery, how would you like your choices limited to three or four doctors in your area only?

Additionally, there are a lot of reasons that employees may have given their medical plans a high mark. First, how many times do you go to a doctor and not get better? Any one who feels lousy and then has a doctor fix them up is bound to be fairly positive in a survey. Secondly, if you are in an HMO or similar product and don't mind going In-Network, why would you dislike the medicl product? $5 or $10 copays sound like a great deal to me. The problem is, these employees are happy going to the doctor because they only pay $5 or $10 and get better, but they won't be happy when the amount they have to pay for insurance goes up considerably. And that's the path we are on.

It's just an assumption, but I would think most of the people who moved to the DC health plans are the more highly educated employees since they can figure out that it makes sense to have an ever-increasing medical spending account, which should in the long run reduce the amount of dollars coming out of their pocket. The employees probably ran the numbers on roughly how many times their families are going to visit the doctor and saw that it made sense to move over to the DC plan.

[Larry M]

Originally, I thought this was a one subject thread.

However, the more explanations of the explanations I read, the more confused I get.

This thread has bounced all over the place by using "DC health Plans" to refer to (1)a method of funding of benefits; or (2) a mechanism for individuals to choose providers; or (3) a type of benefit structure ; or (4) whatever topic the respondent wishes to address.

In my simple world, I have considered the term "Defined Contribution Plan" to encompass those plans where the employer provides the employee with cash (or equivalent) and allows the employee to choose among an array of benefit plans which the employer may have chosen; then, the employee buys the chosen plan with the employer's cash and whatever additional employee cash is needed.

Within that fairly broad and generic definition, there is an infinite variety of combinations - some of which may turn out to be successful (in the eyes of the employer or the employee or the broker/consultant or the carrier - we hope mutually, but, most likely only selectively) and others are doomed to fail.

[Greg Judd]

Originally posted by mroberts

Additionally, there are a lot of reasons that employees may have given their medical plans a high mark.  

Points all well taken. My point was that polls regarding employees' opinions of their health plans are frequently of dubious value, mainly because people generally don't pay enough attention to the features of the plan they're enrolled in (or where applicable, the plans in which they may choose to enroll) to register an informed opinion. To paraphrase Alain Enthoven, people spend more time - and devote more effort to- choosing a wine for dinner than they spend choosing a health plan. They don't value protection against large unexpected charges for medical treatment appropriately - just as you mentioned in an earlier post.

With healthcare at 1/8 of US GDP & climbing, I'm definitely in favor of any measures which re-calibrate social value scales in this area!

& Larry, re:

Larry M Originally, I thought this was a one subject thread.  

However, the more explanations of the explanations I read, the more confused I get.  

With a topic as ripe as this, we may just be getting warmed up!