Higher costs, new option in store for health benefits

BY BARBARA PALMER

When human resources staff sat down earlier this year to calculate how much it would cost to offer the same package of health care options to employees for 2003 as was offered for 2002, the figures brought the national and regional reports of ballooning health care costs sharply home. The cost to employees and the university for the same health care plans would have risen by 35 percent, from $48.6 million to $65.6 million.

The 20-page 2003 Open Enrollment Guide that's now landing in employee mailboxes shows how the benefits team in human resources redesigned plan offerings to pare down costs to a still-expensive but more manageable $61.7 million. The university is projected to shoulder $7.6 million of the additional costs and employees will pay $5.5 million, said Sue Cunningham, benefits programs manager.

To adjust costs, human resources administrators rethought the kinds of plans that would be offered and raised premiums in nearly every plan -- the biggest premium hikes that have occurred at the university in a decade, Cunningham said. Co-payments also will go up in all plan offerings.

Despite the fact that premiums and co-payments are rising, "the variety of offerings, the access we provide and plan provisions are excellent," said Linda Herkenhoff, director of employment, benefits and development, who joined the staff in September after plans were negotiated with providers. "In reviewing our offerings, I'm very impressed -- the benefits staff has really done their homework."

What's changing, what's not

During Open Enrollment 2003, scheduled for Nov. 1 through Nov. 22, Stanford again will offer six plans to employees -- although not the same six plans as were offered last year. One HMO (health maintenance organization), Blue Cross California, has been dropped altogether.

The plan, in which 8 percent of employees enrolled last year, was dropped because of repeated increases in costs and because the services it offered were redundant, Herkenhoff said. Ninety-eight percent of doctors in the Blue Cross Network are accessible through Health Net and PacifiCare HMOs, which are still being offered, Herkenhoff said. Employees enrolled in Blue Cross California automatically will be enrolled in PacifiCare, unless they change their benefits options during Open Enrollment, she said. Plans for making transitions between doctors and health care services are available for employees who need them, she said.

The university's policy is to fully subsidize the cost of enrolling employees in the lowest-priced plan and to subsidize 80 percent of the cost to enroll an employee and family. As was true last year, Kaiser Permanente is the lowest price plan offered. Last year, 26 percent of employees enrolled in the Kaiser plan, Cunningham said.

Approximately 8 percent of employees are expected to enroll in the "consumer-driven" Definity Health plan, a new offering that is so different, it's literally off the chart. It is not included in a "Summary of Health Care Benefits" comparing the five other health plans that is provided to employees in open enrollment materials.

Designers of the plan, which gives employees a "personal care account" (PCA) with which to pay medical expenses, expect that health care costs will decrease when consumers are given more information about health care and financial incentives to spend less. Once PCA dollars are used, employees pay a deductible and then the plan reverts to a PPO (preferred provider option). Unused PCA dollars can roll over into an employee's account year to year, if the employee remains enrolled in Definity.

Offering the plan is both a practical and philosophical move, since such plans make employees more aware of the true cost of health care, Herkenhoff said. "Getting toward consumer-driven plans is moving us in the right direction."

Although companies offering plans like the one offered by Definity have marketed the potential for an individual to accumulate PCA dollars, that should not be "a driving force" in an individual's decision to enroll in Definity, Herkenhoff cautioned. "If it does, great. But Stanford evaluates all of its vendors every year," she said. If plans don't measure up in terms of quality and cost, they aren't offered again.

Access to doctors

Along with cost and quality, the benefits department considered access to doctors in designing plan alternatives, Herkenhoff said. One of the things the benefits department knows about employees here is that there is a loyal following for doctors at Stanford Hospital and Clinics and the Palo Alto Medical Foundation (PAMF), she said.

That preference was one of the primary reasons that Stanford added Definity, which allows access to Stanford doctors, Cunningham said. The Stanford PPO also offers access to Stanford Hospital and Clinics doctors.

A contract between PAMF and Definity Health is still being negotiated, said Jill Antonides, PAMF director of communications. PAMF, which had announced in August 2001 that it was no longer accepting new primary care patients in family practice, pediatrics or internal medicine, began to accept new patients in those areas in August 2002, she said.

If employees have questions about whether individual doctors will be accessible through a particular plan, the sure way to be certain is to call the doctor's office and ask, benefits services manager Charles DeSantis said.

Co-payments, premiums to go up

For many plans, co-payments will increase $5 for office visits and from $5 to $15 for prescription drugs, depending on the type purchased.

The dollar amount of premium increases for 2003 range from an additional $12.32 per month for an employee only enrolled in PacifiCare to an additional $169.66 a month for an employee and family enrolled in the Stanford PPO, the highest priced plan. Depending on plans and coverage, the percentage monthly increase ranges from zero, for the Kaiser plan covering an employee only, to 96 percent (from $18.48 to $36.20) for an employee only covered by Health Net.

"No one wants to have double-digit increases, but I can't imagine that this is a big surprise," Herkenhoff said. The search for solutions to rising health care costs is one of the hottest policy topics in the United States, she said.

Although she's in only her seventh week of employment by Stanford, Herkenhoff, a former corporate vice president for human resources, has a broad view of the health care industry.

"In my experience, the Stanford plans offer more comprehensive access at competitive rates than many other employers offer," Herkenhoff said.