Three Things Employers Should Explain to Employees about Health Plan Costs

In this article published on November 3, 2016 in the Sacramento Business Journal and San Francisco Business Times, Sutter Health Plus Sales Account Executive Paul Brunetta discusses three things employers can explain to employees about health plan costs in simple terms.  

When your employees are scanning the menu of health plan options during open enrollment, they will likely have questions about the health plans offered, the differences in costs and what’s best for them and their families.

As an employer, you should be prepared to help your employees navigate their options and make informed choices. Here are three things employers can explain to employees about health plan costs in simple terms.

PPO versus HMO

A Preferred Provider Organization (PPO) allows employees to select any doctor or specialist, either in-network or out-of-network. While this allows for added flexibility and choice, it often comes at higher out-of-pocket costs for employees than coverage with a Health Maintenance Organization (HMO). A member doesn’t need to select a primary care physician (PCP) and doesn’t need a referral to see a specialist—although the member may save money by choosing providers within the PPO network.

With an HMO, employees select a PCP (and medical group) who provides most primary care and coordinates care from other providers, including referrals for specialty care, X-ray, laboratory and other services. Many covered services require a referral or prior authorization from the PCP’s medical group. Of course, a member may access emergency and urgent care from any facility in or out of the HMO’s network, anywhere in the world, without a referral for an emergency medical condition.

The verdict: A PPO may give your employees more choice, but it may cost more too. Members also become responsible for coordinating their own care if they don’t establish a relationship with a PCP.

Plan coverage levels

Most plans offer a wide range of coverage options. While the highest or “richest” level is the most expensive and the lowest is the least expensive, plan coverage levels have nothing to do with the quality of care. The difference between the plans is how much the health plan will pay for covered services versus what your employee pays out-of-pocket.

If your employee wants to pay a higher monthly premium, but lower out-of-pocket costs in the form of copayments, coinsurance and deductibles, the highest coverage level is the best choice. The Affordable Care Act (ACA) created standardized “metal levels” to help people understand how much they will pay versus how much the plan pays. In the individual and small group market, Platinum and Gold plans have the highest level of coverage. If an employee wants to pay a lower monthly premium and chooses to pay more out-of-pocket costs, then the lowest coverage levels are the right choice. These are the Silver and Bronze plans in the individual and small group markets.

Many employers today offer employees the option of a high-deductible health plan (HDHP) and the option of pairing an HDHP with a health savings account or flexible spending account. Typically, an HDHP includes a lower monthly premium, but a higher deductible and out-of-pocket costs in the form of copayments or coinsurance. The member must reach the deductible before the health plan will pay for most services.

Your employees should evaluate how much health care they and their families will need for the year. What are their prescription medication needs? How many times will they visit their PCP? Is there a baby on the way? Are there any planned surgeries or long-term treatments? What about medical surprises that may pop up during the year? Most people believe that selecting a plan that is somewhere in the middle, such as a Gold or Silver plan in the individual and small group markets, is the best choice for them.

The verdict: More coverage costs more money—but it’s up to your employees to figure out what’s best for them.

Prescription medication costs

Some plans have higher pharmacy copayments than others. If the benefit plan has an open formulary, it means virtually every medically necessary drug on the list is available to an employee when prescribed by an in-network provider and dispensed at an in-network pharmacy. If the employee is taking a prescription medication, make sure that employee confirms the formulary tier for the covered drug. Consider whether the plan offers mail order prescription coverage, which may also allow the employee to get a greater supply (sometimes up to three months) of maintenance drugs—high cholesterol, blood pressure medicine, etc.—at a lower cost.

The verdict: Employees should make a list of all the medications they take and assess their needs—sometimes medication needs are overlooked and employees are blindsided after open enrollment is finished.

By helping your employees understand their health plan options and the associated costs, you can make it easier for everyone to select the right plan based on their own financial and health care needs and preferences. Your health plan options will do more than just provide coverage for your employees—they’ll be tools for employee recruitment and retention.