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Overview of Contributory Plan Development for Small Businesses (October 11, 2007)

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This document outlines the objectives and design options for a new contributory plan aimed at small businesses with 2-50 employees. It highlights the need to meet core employee needs, offer competitive pricing, and improve employee engagement in cost and benefits. The report reviews existing market plan designs, introduces new options based on employer contribution percentages, and showcases examples. Initial research indicates strong support from employers for plans focused on employee choice and engagement. Future steps include more targeted market research.

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Overview of Contributory Plan Development for Small Businesses (October 11, 2007)

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  1. Contributory Plan Product Development Overview Thursday, October 11, 2007

  2. Contributory Plan Development • Objectives • Meet core needs of small businesses (≤ 50 employees) • Competitive price • Simple administration • More “engagement” by employees in cost & benefit features • Provide more options to lower end of market (e.g., 2 – 25 employees) • Complement existing small group offerings

  3. Contributory Plan Development • Small group market (<50 employees) • 75,000 (+/-) employers • 850,000 (+/-) employees • Percentage offering employer-sponsored insurance1 • 2 – 9 employees 43% of employers • 10 – 24 employees 77% of employers • 25 – 99 employees 95% of employers 12005 data from Medical Expenditure Panel Survey (US Dept. of Health and Human Services, Agency for Healthcare Research and Quality)

  4. Plan Design Options • “Existing market” plan design • Employer “designs” benefits & “shops” carriers • Employer makes fixed contribution (e.g., 70%) toward carrier’s group (composite) rate • No plan options for employees • High employer engagement / low employee engagement

  5. Existing Market Plan Design Example • Worcester-based small employer with eight employees, ages 25 - 61 • Employer chooses Harvard Pilgrim Core Coverage Plan w/Rx (Bronze) • Composite single rate = $272 • Employer pays 70% = $190 • Employees pay 30% = $82

  6. Group Rating v. Individual Rating • Group rating • One rate based on employee census demographics at time of purchase/renewal • Requires minimum participation level (e.g., 75%) of eligible employees • Provides rates by employee status • Single Rate – applies to all single employees • Family Rate – applies to all employees with families • Individual rating • Employee rates vary based on individual demographics • No minimum participation level requirement

  7. New Plan Design Options “Percentage of Premium” Plan Design – Option #1 • Individually rated, because multiple carriers offered • Employer selects coverage tier (Gold, Silver or Bronze) • Employer does not design benefits or shop carriers • Employer selects contribution % (e.g., 70%) • Multiple plan and carrier options for employees • Lower employer engagement / higher employee engagement

  8. Percentage of Premium Plan Design Example • Worcester-based small employer selects Bronze w/Rx coverage tier • Employer contributes 70% of monthly premium for any plan in tier • Employees free to choose any carrier within the Bronze w/Rx tier • Employer and employee $ contribution varies by carrier chosen by employee

  9. Percentage of Premium Plan Design (cont.)

  10. New Plan Design Options “Benchmark” Plan Design – Option #2 • Individually rated, because multiple carriers offered • Employer selects coverage tier and carrier (i.e., “benchmark” plan) • Employer does not design benefits or shop carriers • Employer makes fixed dollar contribution, based on a percent of premium toward composite rate (e.g., 70%) and corresponding employee contribution (e.g., $82) • Multiple plan and carrier options for employees • Lower employer engagement / higher employee engagement

  11. Benchmark Plan Design Example • Worcester-based small employer selects Bronze w/Rx coverage tier and Harvard Pilgrim Health Care’s Core Coverage Plan as “benchmark” plan • Employer contributes 70% of monthly “modified composite” premium, based on HPHC’s Core Coverage Plan rates • Employer’s $ contribution is fixed in aggregate, but varies by individual employee • Employees free to choose any carrier within the Bronze w/Rx tier • Employees each contribute same $ toward benchmark plan, but varying amounts based on carrier selected

  12. Benchmark Plan Design (cont.)

  13. Contributory Plan – Initial Employer Research • Two small-employer focus groups held in September → 20 employers • Tested three plan design options (A) - Employer pays fixed percentage of specific coverage tier (e.g., Gold, Silver, Bronze) (B) - Employer pays fixed percentage of any coverage tier (C) - Employer pays fixed amounts, based on benchmark plan, toward coverage tier → “modified” composite rating

  14. Contributory Plan – Initial Employer Research • 89% of employers strongly supported concept of greater employee engagement and choice • 11% of employers preferred Option A (fixed percentage of a specific coverage tier) • 0% of employers preferred Option B (fixed percentage of any coverage tier) • 89% of employers preferred Option C (fixed amounts, based on a benchmark plan) • 85% of employers “liked” Option C • Next research to focus on Options A & C

  15. Contributory Plan Development • Market Research – October • Four groups of small employers with geographic and industry segment distribution → 50 Employers • Brokers • Chambers of Commerce • Business Associations

  16. Contributory Plan Development • Next Steps • October – Research / focus groups • November - Define plan design attributes - Make recommendation - Board approval

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