How Health Care Costs Can Impact Your Paycheck
Beginning in July, if you have health insurance and go to an in-network hospital but a doctor who is not in your insurance plan’s network helps you, you aren’t supposed to get a surprise bill. The law is designed to stop what’s called balanced billing - the practice of charging a patient for medical care delivered by doctors outside their insurance network even when the the care was performed at an in-network facility.
It’s a small effort toward more clarity for health-care prices. It’s not exactly price transparency for health care, though. Health care is complex and pricing can be confusing and convoluted.
Co-pays, deductibles, in-network, out-of-network, co-insurance, patient responsibility, negotiated rates, negotiated discounts -- all these phrases describe some part of the price patients pay for health care in addition to their monthly premiums. For most Floridians, that means money out of their paycheck.
While Obamacare gets plenty of attention in Florida (and for good reason because Florida has the largest number of people of any state signing up for health insurance via Healthcare.gov), four out of 10 Floridians get their health-care coverage through an employer. That makes the employer-based health insurance market the largest in Florida. That's slightly larger than the percentage of the population covered by government-provided Medicare and Medicare, according to data from the Kaiser Family Foundation.
WLRN has launched a reporting project aiming to help better understand health-care prices called PriceCheck. It’s a database of prices that health-care facilities shared with our partner - Clear Health Costs -- and costs contributed by you.
PriceCheck is a tool that you’ll be able to find on our website. It does two things: It lets you share your health-care costs with the community — the charges from the doctor or hospital, what you paid… and if you have insurance, what your insurance paid.
The second thing it does is it will let you see what other people paid.
The U.S. spends $1 out of every $6 on health care, according to the World Bank.
The U.S. spends more on health care per person than any other country in the world.
To hear how the rising cost of health care and health insurance impacts companies providing that coverage, we spoke with four business leaders headquartered in South Florida.
Paul Parker is the chief human resources officer at Royal Caribbean Cruises. He is responsible for 74,000 employees across the globe, including 6,500 in South Florida.
Chuck Fallon has 3,000 employees in Florida, plus several thousand more outside the state. He is CEO of FirstService Residential, a property management firm based in Dania Beach.
Christopher Gould is managing director at Jungle Island. He has 400 full- and part-time employees.
Robert Taylor is the second generation to run BBI, based in Ft. Lauderdale. While he has a few hundred employees in total, just 40 work in South Florida.
What has been the impact of health-care costs on employee pay?
Parker: It's a major piece of the pie. I think most companies don't spend enough time educating people on it. Because when people think about their compensation, it is the cash that they get in their check versus the premiums that we pay for them and the availability that they have for health care. As employees mature it becomes more of a relevant fact. And people start to make decisions on where they become employed based on the type of health care that's provided, especially, [for example] if you have a special needs kid. We paint the picture to show the pie, say, 'This little sliver of cash that you get is just that, because the major portion of it is the benefits we provide in the premiums that we pay for you."
Fallon: Over time it has impacted some [pay and hiring]. We look at our associates in a holistic fashion -- not just health-care benefits but also the opportunity to grow and the opportunity to become a more effective employee and grow their own personal life.
Gould: Unfortunately it's been a constant escalation of costs over the years. That doesn't fit well with the tourism jobs that we have. It's held down wages because the employer contributions have gone up and up. We make significant contributions toward the benefits that our employees have. It makes us have to make some tough choices. Unfortunately, holding down wages is a big thing.
Taylor: As a small company we're interested in employee retention and recruitment and retention on a long-term basis. We want to offer the best possible package to our associates. It is very very difficult to do in this one aspect. We feel like we do in other areas, but in the health-care area it's a very challenging proposition to give best-in-class [health-care plans] which is consistent with our culture.
On finding the best health-care coverage options for the money for employees:
Parker: We make trade-offs. We try to make sure that people understand [our goal is)]to make sure that we're coming flat for our employees while enhancing the benefits. At the same time we constantly survey [our employees about] what things they want so that we can design a plan for every individual If you're a single 20 year-old, you may not want to pay for insurance because you're healthy and you're invincible. So we try to create a high deductible plan. If you're a person that's has a family with kids, you may want to be in an H.M.O. that allows you to pay a visitation fee but have a low premium. We can provide three or four plans for each kind of spectrum of employees that we have.
Fallon: It's been a pretty agonizing process over the last several years. It has impacted our business model. It's been incredibly difficult to manage through the minefield of regulation that we've seen. The regulatory requirements have increased and forced us to look at the world differently and change how we provide these kind of benefits to our associates. We've had to focus on more consumerism, and how we look at health-care costs.
Taylor: As a small company we have some distinct disadvantages in sourcing health care based on the lack of size and lack of scale which translates nowadays into a lack of choices.
On connecting the cost of health care to an employee's take home pay:
Parker: We do a lot a lot of sensitivity analysis around paycheck impact. If you raise a premium, for example, by $100 a paycheck, the reality for somebody that makes $40,000 or $50,000, [the impact] is huge. Now all of a sudden this is a $2,400 impact to this person's paycheck. And the benefit may not have changed. So it's hard to explain to somebody why you're paying $2,400 more for something and [they] don't see an increase in benefit. [A company] may want to do something that keeps the premium flat, but increases the deductible. It doesn't really impact them every day, so raising the premiums is the last thing we want to do when we do [health-care insurance] plan design. Is much more around how do we not impact people's paycheck but actually impact their behavior?
Fallon: In the last three years, it has been such a changing landscape -- not only in how we manage those costs and how we stay competitive in providing those benefits to our associates but also in how they buy health care. So one of the biggest challenges we've had is in educating them as to the choices that they make. Certainly we have to filter those choices at the outset, but how they go about making those decisions has become much more critical to their own pocket and to how they take care of their families.
Gould: We try to bring in a lot of experts to assist in this. We feel a responsibility to help our new employees who are entering the workforce for the first time. Probably about half of our workers are in this position. It's difficult when our experts don't even know the absolute answer to a lot of the things that have hit employers over the last couple of years. It's challenging, but we work with [employees]. And I'll tell you that it takes up more of my time than it ever did in the past.
Taylor: It's a challenge relative to recruitment against large organizations that have the scale to offer programs that are better. We find it expensive from two standpoints: One, the plans that we have to fund and the cost to our company, and two, dealing with recruitment and running up against superior plans, having to overcome them financially which really ends up being a [higher] cost [in salaries].
How have employer-based health-care plans changed for your employees?
Parker: I think we want to drive our employees into the most effective things for them. We try to differentiate the pricing. We try to tier the pricing from a standpoint of where we want our employees to go that benefit the company but at the same time provide them coverage. We've done some different things around pricing. We've done different things around the doctor bills. And we also do some different things around prescription [drugs] because prescription [coverage] becomes a major piece of medical coverage.
Fallon: Our plans have shifted from the more traditional P.P.O. co-pay plans to consumer-directed plans. We certainly try to provide the tools through UnitedHealth, our insurance provider, to help them make better decisions. Having even deeper transparency in terms of what a specific procedure might cost at a particular hospital or through a particular doctor would certainly help. Those are a little fewer and farther between, but insurance providers like UnitedHealth are helping us narrow those networks into higher quality, more effective cost channels.
What other practices has your company used regarding employee health care costs?
Parker: If an employee spouse has the ability to have coverage someplace else we make them pay a premium if they want to take our coverage -- meaning they pay a surcharge. It's like a one-time fee that you would pay because your spouse could get medical coverage at his or her employer but you chose our's. [That] increases the likelihood of incidence which ultimately drives your premium up. You want everybody to get insurance someplace else. We'll pay you if you take insurance at your spouse's [employer]. Just like we would charge if your wife or husband wants to be on [Royal Caribbean's health plans], we would encourage you, if your spouse has health care to take their health care.