Health Insurance

1. Health Insurance Introduction • Health Insurance in US is provided by employer voluntarily to employees (usually full-time) • Many small employers in US (< 10 employees) do not provide health insurance • 43 million people in US have no health insurance • Most other countries provide health insurance to all citizens by funding through taxes • Ex: Canada has a national health system MGMT 4030 - Managing Employee Reward Systems

2. Health Insurance Costs are Increasing - Here’s Why • Lack of Incentives in the Market • Demand for medical care is inelastic • New Medical Technologies are Expensive • Cost of Malpractice Insurance • Defensive Medicine means expensive procedures • Cost Shifting - to pay for Uninsured patients • Aging Population - heavy users of medical benefits MGMT 4030 - Managing Employee Reward Systems

3. Health Insurance Models • Traditional Plan - Fee for Service • Managed Care - Health Maintenance Organization (HMO) • Managed Care - Preferred Provider Organization (PPO) MGMT 4030 - Managing Employee Reward Systems

4. Traditional Health Insurance Plan • Fee for Service - Few Cost Controls • Provides Maximum Choice of Doctors • Becoming Obsolete - 10% US ‘ees currently use • Financial Features • Deductible - employee pays first $200-$1000 • Co-insurance - plan splits medical costs - 80/20 • Premium - monthly cost of policy - employer and employee both contribute • Cap or Stop Loss Point - employee’s contribution ends at a certain planned level of medical costs • Ex: Blue Cross/ Blue Shield MGMT 4030 - Managing Employee Reward Systems

5. Health Maintenance Organizations (HMOs) • Comprehensive care for one price • Focus on wellness & Preventative Medicine • Pay monthly premium, co-payment ($10 fee per visit), no co-insurance or deductive • Less paper work or claims forms • Doctors need approval for some procedures • Some restrictions on choice of doctors • Use primary care physicians as “gatekeepers” • Ex: Kaiser Permanente MGMT 4030 - Managing Employee Reward Systems

6. Preferred Provider Organizations (PPOs) • Networks of doctors and hospitals - negotiate lowered fees for plan, receive more patients • Incentive to use doctors in network - lower cost to patients under plan - covered under premium • Employee has flexibility to use non-network doctors - higher fees subject to deductible & co-insurance • Has some features of both HMO and “fee for service” plans. MGMT 4030 - Managing Employee Reward Systems

7. Managing Health Insurance Costs • Self-Funding Plan - CU currently uses and lost control of its costs under this approach • Coordinate both spouse’s HI policies -split medical costs and dependents • Develop wellness program - components cover diet ,health screenings, exercise, weight control • Cost sharing with employees - increase employee contributions to premium, 2nd opinions,flexible benefit plans MGMT 4030 - Managing Employee Reward Systems

8. COBRA Regulations - Health Insurance Continuance • Government rules provide continuation of health insurance coverage for employees and dependents after separating from firm • Employee (or dependents) pay 102 percent of premiums to continue group insurance rate • Qualifying events - employee quit, layoff, employee death or divorce • 18-36 months of extended coverage • Penalties for non-compliance of company MGMT 4030 - Managing Employee Reward Systems