Michigan Employers Save Health Insurance Costs By Managing Eligibility

McGraw Wentworth, Michigan's largest employee group benefit brokerage/consulting firm, released the results of its 2008 Southeast Michigan Mid-Market Group Benefits Survey. The 2008 Mid-Market Group Benefit Survey compares health benefits and trends among 376 Southeast Michigan-based organizations with 100-10,000 employees. Highlights of the survey results show that health care costs for Michigan employers are increasing at an average rate of 7% in 2008 over 2007. But some Michigan companies --- called TrendBenders--- are keeping their benefit cost increases to two percent or less by implementing cost-sharing and -saving measures such as increased deductibles and co-pays; eligibility management strategies including eligibility audits and spousal surcharges; and wellness initiatives including health risk appraisals and surcharges for smokers.

"TrendBenders are the high-performing organizations that are proactively managing their employee benefits and for 2007-2008 achieved an average annual increase of two percent or less," said Rebecca McLaughlan, managing director, McGraw Wentworth. "TrendBenders are in the top quartile of the survey participants. They tend to have higher deductibles and co-pays, a higher rate of employees selecting consumer driven health plans, and an emphasis on wellness."

When asked to rank their cost control strategies, TrendBenders and survey participants in total cited eligibility management strategies as three of their top five strategies. Employers are conducting audits to confirm the eligibility of a spouse or child and requiring documentation such as a marriage and birth certificates for mid-year status changes. If an employee has a dependent that is a full-time college student, the parent may be asked to present a college transcript. In instances where a spouse is offered coverage by his/her employer, some employers have implemented a spousal surcharge while others have opted not to allow spousal coverage for individuals eligible for coverage under another employer's plan. Employers that effectively manage eligibility can directly impact their benefit costs by minimizing the number of ineligible dependents they cover. The savings to employers from an eligibility audit can be significant according to McLaughlan.

Survey participants identified the most effective cost control strategies as:

-- Increased deductibles and co-pays,

-- Increased employee contributions,

-- Wellness,

-- Consumer-directed care including offering Consumer Directed Health Plans,

-- Changing health plan vendors, and

-- Disease management.

"At the end of the day, despite these measures to control costs, employers in southeast Michigan continue to provide employee benefits at a higher cost than we see nationally," said Karen Alter, account director, McGraw Wentworth and survey leader. "Locally, health benefit plan increases were at 7% after plan changes while nationally they remain at 6.1% for the third straight year. This trend continues in spite of Michigan's weak economy."

The survey analysis also provides a Total Cost Ratio comparing what Michigan employers and employees pay in total for benefits in 2008 including premiums, employee payroll contributions and out of pocket costs. Specifically, the Total Cost Ratio in 2004 for a median PPO Plan for an individual was $382 per month of which the employer paid 67% or $255 and the employee paid 33% or $127 in payroll deduction ($57) and deductibles and co- pays ($70). In 2008, the median plan Total Cost Ratio is $504 per month of which the employer is paying 61% or $309 and the employee is paying 39% or $195 in payroll deduction ($92) and deductibles and co-pays ($103).

"In comparing 2004 and 2008 costs, employers and employees are definitely seeing higher dollar costs, but there is also an increase in employee cost- sharing," said Alter. "Employers are now building in incentives to direct employees to the right place for the right care such as increasing co-pays for emergency room care versus lower co-pays for office visits."

Survey respondents represent diverse industries including manufacturing, financial and other services, health care, and non-profit organizations. Twenty-eight percent of the employers surveyed have at least some unionized employees and 25% of survey respondents are considered auto suppliers. The McGraw Wentworth 2008 Mid-Market Group Benefit Survey is statistically valid with a 5% margin of error.