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Sharing Responsibility in Health Care

Consumer-driven health care seeks to reduce costs by encouraging employees to become more engaged in their health-care decisions.

By Maya Norris, Managing Editor -- Chain Leader, 10/1/2008

doctor and patient in hospital
Health-care benefits can give a competitive advantage in recruiting and retaining employees in a tight labor market. But as health-care expenses continue to outpace inflation, chains are finding it difficult to absorb those costs. To contain expenses while offering coverage employees will use, companies are turning to consumer-driven health-care products that shift more of the costs and decision-making to employees.

“Employers are asking employees to become partners in controlling health-care costs and getting the most value from the health-care dollar,” says Mike Murphy, a member of the Society for Human Resource Management Total Rewards/Compensation & Benefits Special Expertise Panel.

HMO vs. PPO

Some human-resources professionals say coverage from health maintenance organizations is on the way out in favor of preferred-provider-organization plans. Because they are driven by co-pays, a low flat fee for services, HMOs don't give employees a good idea of health-care costs. On the other hand, PPOs have a deductible and co-insurance, in which employees pay a percentage of the bill.

“We don't expect HMO to last forever,” says Stacey Frederiksen, director of human resources at San Diego-based Pat & Oscar's, which offers HMO and PPO plans. “We've got to be prepared for the more consumer-driven plans, which have a high deductible. Gone are the days where regardless what the doctor does, you pay $10.”

Medical Savings Accounts

To get employees thinking about the true cost of health care, many companies offer medical savings accounts to help pay for out-of-pocket medical expenses.

For example, 150-unit, Austin, Texas-based Carino's Italian offers health reimbursement accounts and flexible spending accounts. HRAs are funded by employers, not employees. Although the funds roll over to the next year, employees forfeit them when they leave their companies. FSAs allow employees to contribute money into accounts tax free. However, if they don't use all the money within the year, they lose it.

With health savings accounts, employees and employers may contribute funds into the employee's account. Employees may take the money when they leave their jobs, and the funds roll over into the next year. But to qualify for an HSA, employees must enroll in a high-deductible plan.

San Diego-based Garden Fresh Restaurant Corp., parent of 34-unit Souplantation and 69-unit Sweet Tomatoes, will transition to a high-deductible PPO tied to an HSA in three years. “It's a friendly alternative to managed care,” says Director of Compensation and Benefits Lisa Sorce. “It allows everything to be transparent online with regards to the cost for medical services, the cost of prescription drugs.”

Wellness Programs

Wellness programs that emphasize prevention and health are another way to reduce costs. They usually include programs such as smoking cessation, paying for preventative care, and reimbursement of health-club memberships.

“We are definitely trying to push wellness because we believe that wellness prevents disease and disease is what's expensive,” says Devona Haslam, senior director of human relations at 114-unit, Tulsa, Okla.-based Mazzio's Italian Eatery, which offers health-club reimbursements and is looking into other wellness programs.

Limited-Benefit Health Plans

While salaried employees have access to these plans, hourlies usually don't. Instead, many chains offer them limited-benefit health plans. These low-cost, controversial plans cover routine medical care such as doctor visits, lab tests and prescriptions, but they don't offer catastrophic coverage and have low liability caps.

 

Resources & Links

Society for Human Resource Management published the 2008 Employee Benefits survey. www.shrm.org

National Restaurant Association supports the Small Business CHOICE Act, which was introduced in July in Congress. It would allow small businesses to form cooperatives to purchase insurance and receive tax incentives for joining these purchasing pools. www.restaurant.org

National Business Group on Health is a nonprofit organization that has studies, publications and position statements on health-care purchasing and best practices. www.businessgrouphealth.org

HR Policy Association has news stories, analysis and policy information about health-care issues. www.hrpolicy.org

Council for Affordable Health Insurance is a research and advocacy association of insurance carriers. www.cahi.org

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