COBRA Updates

We would like to inform you of some recent developments that effect how COBRA Notices
should be mailed.

We recommend that:

• COBRA Notices be sent via First Class Mail with a United States Postal Service
  
• Certificate of Mailing attached.
  
• A photocopy of the COBRA Notice and a photocopy of the envelope it was sent in with the customer's portion of the Certificate of Mailing be attached and incorporated into the permanent COBRA file for each qualified beneficiary.
  
• The photocopy of the letter and the mailing envelope be stamped with a
  
• Declaration of Mailing". A draft of this Declaration of Mailing has been attached to this newsletter.
  
• This Declaration of Mailing be signed by the Employee who processed the Paperwork and mailed the correspondence. This will establish that the letter was mailed and verify the contents were related to COBRA.
  
• You establish a written policy and procedure that outlines in detail the notification process and what the steps will be throughout this mailing procedure.

As always, these recommendations are not intended to provide you with legal advice. We do recommend that with this notice, as with all matters pertaining to Employee Benefit Law, you may wish to review our recommendation with your legal counsel.

Consumer Directed Health Care (CDHC)

In the recent past, for some Employers, Consumer-Directed Health Care meant fully replacing their health benefits with high-deductible plans and Health Savings Accounts (HSA's). Others gave Employees a choice between HSAs, Health Reimbursement Arrangements and traditional health plans. Still other Employers didn't adopt HSAs or HRAs, but maintained their traditional plans and utilized online tools to help Employees select health care providers based on price and quality.

Employers continue to "navigate" through the choices Consumer-Directed Health Care offers. It's important to see how these options impact plan design and cost containment and to evaluate how Consumer-Driven Health Plans fare in enrollment and what changes vendors plan to make to them.

Cost Containment

While empowering Employees to take responsibility for their health is a key component of Consumer-Directed Health Care, many Employers look to the CDHC movement to help better control out-of-control health costs.

Recently, Health Reimbursement Arrangements were established at several of our Clients including Private and Public Sector Employers.

What effect did this have on their plans?

For a Private Sector Employer who had just over 50 Employees covered by a local HMO plan, adding deductibles and increasing co-pays reduced costs by 20%. The Employer and the Employees now have lower insurance costs.

The Employer then added an HRA plan with a local Third Party Administrator who is providing claims administration and where the Employees will have a portion of the deductibles paid by the Employer as they are incurred. Clearly it's a "win-win" for both parties; for those members who use these benefits, the Employer is assisting in the cost shift, and the members have the benefit of knowing their monthly insurance costs have been reduced. Also the Employer is better off because they have reduced insurance costs, and only spend the savings if and when claims are incurred.

For a Public Sector Employer, a simple HRA was added for the specific reimbursement of in-patient hospital expenses incurred by the members. The Employees now enjoy a lower payroll contribution because of this change, and the Employer reimburses any member who incurs one of the hospital co-pays. Again, both the Employer and the Employees "win" in this scenario, and this Employer will likely reduce their health benefit increase by approximately $200,000.

Our Organization assisted both Employers in establishing the formal process and provided them with documents, material, and more Importantly, employee educational support in implementing these plans.

Please contact our office on how a simple HRA can possibly benefit your plan costs.

Enrollment Trends

Participation in Consumer-Directed Health Plans is growing, but is still somewhat small. Enrollment rates for CDHPs increased from 1.1% of covered employees in 2004 to 3.9% in 2005, according to Fidelity Investments, which surveyed 86 Employers with more than 2,000 workers.

Marc Hallee, senior vice president of Health and Welfare consulting for Fidelity, stated, "A number of clients that I work with have seen numbers as high as 50% of their Employees enrolled in CDHPs. [For workers who already had a CDHP], we saw re-enrollment rates reach 95%, the highest observed across all types of health plans. This indicates a very high level of Employee satisfaction with CDHPs."

At least 1.6 million Americans are enrolled in a Health Reimbursement Arrangement, and 810,000 are enrolled in a high-deductible health plan that qualifies for a health savings account, according to the Kaiser Family Foundation, which studies health care trends.

Employer Actions

Roughly 45% of large firms indicated they would offer a Consumer-Directed Health Plan this year, typically as one of several health plan choices, a recent Fidelity survey finds. Among employers projected to have a CDHP this year, 62% said they would provide an HSA, while 38% declared they would offer an HRA.

Hallee predicts that at least three-fourths of Fortune 500 companies will offer a CDHP next year. "Employers are becoming increasingly committed to CDHPs as a way to address health care cost issues, a development that should help drive employee participation rates even higher," he says.

When they don't offer a CDHP, it's because "they do not think their employee population is engaged enough to understand the program," he explains.

Conclusion

Consumer Directed Health Plans have a great impact on the purchasing of health care. Based on recent studies the emerging data suggests positive outcomes through Employer sponsorship of Consumer Directed Health Plans. There is a higher degree of consumer engagement exhibited by those employees (and their families) who participate in some type of CDH program. Consumers are generally satisfied with their CDH plan choices and have a high incidence of reenrollment. The availability of more information geared toward quality provider analysis, tiered benefit design, integrated wellness incentives and other plan enhancements will also help change the face of Consumer Directed Health care over the next few years.

Contact your EBS Foran Account Manager to learn how we can help you understand and benefit from a Consumer Directed Healthcare Plan.

Sources:
Employee Benefit News o March 2006
Leah Carlson Shepherd & Tom Anderson

International Society of Benefit Specialists Benefits Quarterly - 2nd quarter 2006
C. William Sharon, CEBS & Toni Donahue