Healthcare Business News

Covered at no cost

Some employers still pay the full health premium

By Ashok Selvam
Posted: September 29, 2012 - 12:01 am ET

The health insurance coverage offered to employees at Black River Memorial Hospital gives the 21-bed facility in Wisconsin, two hours east of Minneapolis, an advantage when it comes to recruiting.

“I get pressure from some of my counterparts at other facilities,” says Holly Winn, the hospital's vice president of ancillary services and human resources. “They say: 'Somebody applied down there, and I hear that your employees don't pay anything toward their health insurance. How do you do that?' ”

Black River's employees don't make any contribution toward the premium for their health insurance, for both single and family coverage. While the hospital pays 100% for health coverage, it does require cost-sharing for dependent long-term care insurance and dependent life insurance. The hospital covers less than 25% of those premiums, which tend to be less costly.

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Winn says the hospital's premium policy was revised in 2000, when Black River implemented a “cafeteria plan” for benefits, which treats all employees more equally. If employees decline health insurance, for instance, they could select another benefit. Employees with single coverage have a $750 deductible, with a copayment limit of $2,250. Family copayments max out at $4,500, no matter how many family members.

Such fully covered health insurance benefits are a rarity, according to the 2012 Kaiser Family Foundation/Health Research & Educational Trust's Employer Health Benefits Survey, which covers workers in all industries.

The survey found that in 2012, 16% of employees with single coverage worked for employers that covered 100% of their premiums, a rate that has been unchanged since 2010. Meanwhile, only 6% of employees with family coverage worked at organizations that paid their full health insurance premiums.

A valuable perk

The value of that benefit has been climbing steadily, based on what workers must pay if their employers require cost-sharing. The average annual single-coverage premium was $3,083 in 2002, with a $466 employee contribution, or 15%, and a $2,617 employer contribution, or 85%. In 2012, the average annual premium for single coverage was $5,615, with employees contributing 17%, or $951, and employers contributing $4,664, or 83%.

For employees with family coverage in 2002, the average health premium totaled $8,003, with the employee portion at $2,137, or 27%, and the employer contribution at $5,866, or 73%. Ten years later, the average family-coverage premium is $15,745, with the employee portion at $4,316, still 27% of the total premium, and the employer contribution $11,429, or 73%. The employee share of health insurance coverage has grown at both small and large firms (See chart).

While Kaiser/HRET didn't break out benefits by industry, stories from Black River and other healthcare companies show that the bottom line when it comes to benefits isn't just about money.

Located in Black River Falls, Wis., the hospital serves a farming community. Winn says farmers can face higher insurance costs because of their risky work with machinery, animals and pesticides. She says the hospital's benefits package helps her recruit the spouses of farmers from a 100-mile radius. Some employees will drive 60 miles one way to work at Black River, she adds.

“It's not just the health benefits,” Winn says. “It's staying ahead of the game and doing the right thing.”

No-cost health insurance is also becoming a rarity at large companies. For example, Microsoft Corp., which for years paid the full share of its staff's premiums, announced two years ago that its employees would have to begin contributing to their plans starting in 2013.

Tech companies that thrived during the 1990s bubble economy—and have a tradition of rich benefits packages—are still the ones that are more likely to offer coverage at no premium cost to the employee, says Helen Darling, president of the National Business Group on Health, a not-for-profit organization headquartered in Washington that represents large employers in national health policy issues. And that's not just health insurance, but also broader benefit plans available to employees at no cost.

Darling says many healthcare providers that pay the full premiums offer some incentives to encourage employees to use their organization's facilities and resources. “They might have a preferred provider network,” Darling says. “It would be easier to establish now that we have more integrated systems and more hospitals are partnering with each other.”

Healthcare workers regularly used their own facilities 20 years ago, a practice that Darling says has waned, in part, because many workers no longer live near their workplace. She says that more expensive urban real estate priced healthcare workers out of living near their employers' facilities. But in a time when there's more focus on efficiency and cost control, she says it would make sense for healthcare employers to offer some type of incentive to staffers—such as waiving or lowering copayments—to use their own provider networks, she says.

ZocDoc is another healthcare company that covers 100% of all its employees' premiums. However, workers do have out-of-pocket costs for deductibles, copayments and coinsurance. The New York-based company, which has about 300 full-time-equivalent employees, allows patients to book appointments with physicians online through ZocDoc's website. Physician groups pay for the company's service, which is then offered free to the clients' patients.

Dr. Oliver Kharraz, the company's co-founder and chief operating officer, says many of the firm's hires are recent college graduates who are taking their first job out of school. Thus, they have little idea that ZocDoc's insurance policies are unusual compared with other workplaces. But Kharraz says he believes any heightened expectations are a positive in recruiting and retaining employees.

The team at ZocDoc believes they're getting a strong return on their investment through healthier and happier employees. “We believe that access to healthcare is the one big problem we are trying to solve in America,” Kharraz says. “And we really should do our part.”

The Kaiser/HRET survey shows a big discrepancy in amount of cost-sharing based on the size of the employer. At small firms, for example, those with three to 199 workers, 36% of the employers pay the full cost of single health coverage. At larger companies, that percentage falls to just 6%.

Benefit packages are more important at smaller companies, which might struggle to attract well-qualified workers, says Paul Fronstin, director of the health research and education program for the Employee Benefit Research Institute, a Washington-based group that advocates for employee benefit programs. Smaller companies tend to offer smaller salary packages, and some feel the smaller markets aren't as attractive to potential employees.

Meanwhile, Emergency Medicine Physicians, Canton, Ohio, an ER staffing firm, employs about 1,300. The company pays all of its employees' premiums with a $10 in-network copayment and $15 for out-of-network physician office visits. The company covers 100% after the same copayments for routine and well-care visits. Those aren't subject to the annual deductible, which is $500 per person and a maximum of $1,000 per family. In addition, for hospital room charges and outpatient surgeries, Emergency Medicine Physicians' plan covers 100% of in-network charges and 90% out of network.

Despite the generous benefits package, company CEO Dr. Dominic Bagnoli Jr. doesn't think it's a major recruiting tool.

“I don't think American emergency physicians are taking their jobs based on what benefits they receive,” he says. “They're looking for the best fit, if they believe in the mission, if they want to work in this environment or culture.”

Bagnoli acknowledges the policy as a way to reward loyalty and as a tool for retention. Health insurance represents the second-largest expense for the company, behind compensation, with malpractice insurance ranking third.

The company is self-insured, and officials review the premium policies every two or three years. When other insurance companies make bids on its contract, Bagnoli says they often tell him that the company's benefits plan is too generous, and they counsel the company to reduce the coverage offered. But Bagnoli says Emergency Medicine Physicians hasn't reduced a single benefit over the company's 20 years.

“I think it's all about trying to determine your philosophy as an organization,” Bagnoli says. “I don't really look at the other companies and think that they're not doing it the right way.”

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