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Contributory Plan Product Development Overview

Contributory Plan Product Development Overview. Thursday, October 11, 2007. Contributory Plan Development. Objectives Meet core needs of small businesses ( ≤ 50 employees) Competitive price Simple administration More “engagement” by employees in cost & benefit features

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Contributory Plan Product Development Overview

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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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