Hospitals, Like All Employers, Tackle Health Coverage Costs Post-Reform

Health insurance premiums are expected to increase post-healthcare reform by estimates ranging from 2 percent to 9 percent due to provisions such as co-payments for preventive care, covering children regardless of pre-existing conditions, eliminating lifetime coverage caps and fees on pharmaceutical companies and device makers that are beginning to trickle down to consumers. These increases will affect both employers and employees and create an increased financial burden for many businesses in an already soft economy.

In a recent study by Grant Thorton, 84 percent of U.S. CFOs cited employee benefits, including healthcare coverage, as the greatest pricing pressure facing their organizations in the coming year, and hospitals are not exempt from this challenge.

Maintaining competitiveness while managing costs
Maintaining competitive benefits in an industry with historically tight margins is a constant challenge that is becoming more difficult, says William Nelson, human resources regional manager at Providence Saint Joseph Medical Center in Burbank, Calif.

"Like any employer we've experience some higher than average increases over the last few years," says Mr. Nelson. The system, part of Providence Health & Services, expects health benefit costs to increase 9.3 percent for 2011, compared to 2010.

While the hospital system could simply pass all the increases on to its employees, it has slightly increased the percentage it contributes toward premiums in order to maintain its competitiveness as an employer — which is particularly important in an industry that faces nursing and other professional staff shortages in many areas throughout the country. "We've capped employee share of costs," he says. "We have to be cognizant of how competitive we are."

Alternate ways to reduce healthcare costs
Although some premium increases are inevitable post-reform, Providence has had success in the past reducing total spend on health benefits by instituting various alternate approaches to reign in costs.

Wellness programs. In an attempt to improve the overall health of its employees, Providence has implemented several wellness programs. For example, the system offers its employees access to a 24/7 nurse hotline, sponsors 'healthy eating' initiatives and, most recently, began offering a new benefit of decision-support for employees confronted with a new illness. "To reign in costs, it has to be a multi-pronged approach, unless you're willing to slash benefits," says Mr. Nelson.

Eligibility audits. An eligibility audit ensures that only those who are eligible under the employer's health plan are covered by the plan. Because ineligible member increase costs, taking steps to remove truly ineligible beneficiaries can create savings. Providence worked with ConSova to perform the audit. The audit identified 1,200 ineligible plan members, mostly adult children of employees no longer eligible for the plan or unmarried couples. With a plan of just over 16,000 members, the audit uncovered roughly 8 percent of its member were ineligible, which has saved the health system an estimated minimum of $1 million per year.

Mr. Nelson, calls the measure a way to "clean the slate" when it comes to controlling health costs, but adds that the hospital, which is built on Catholic core values, was careful to include an appeals processes and allow exceptions when appropriate.

Although healthcare reform will expand eligibility, particularly in the case of children being allowed on parents' plans, ensuring only eligible members are on the plan is a first step to controlling costs without cutting benefits.

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