When is saving a meager $8 a month a victory? When it follows several years of rising health-care costs.
Denise Sabolcik, 42, was growing increasingly worried about price hikes in her health maintenance organization plan through her employer in Pittsburgh, FedEx Ground, a unit of FedEx Corp.
Today, under a vastly expanded menu of insurance options that FedEx began in 2003, Sabolcik’s total outlay for insurance premiums and co-pays has gone down by a little under $100 a year. Her plan at work covers herself, her husband and two school-age children for medical, dental and vision benefits, with premiums of about $2,300 a year.
Her premiums went down under the new plan, but unlike the HMO model, she now pays for 10 percent of services she uses. Even with several unforeseen co-pays, she estimates her total expenses will be lower this year than under the HMO.
FedEx workers choose from 81 options, tailoring their premiums, deductibles, co-payments and prescription charges to best fit their expected spending. A single, healthy worker could take lower premiums and a high deductible, for example. If major illness strikes, the plan’s catastrophic coverage picks up the tab.
Basic medical coverage for a single person can be had–sans vision or dental–for $2 a month. An enhanced medical-only plan for a family of four, which includes the richest medical benefits but not vision or dental, runs $1,775 a year–far less than the average $2,957 that employees at large firms pay, according to industry estimates.
The reversal from increasing costs to a slight decrease is a huge benefit for Sabolcik, an information technology manager, and not only for herself.
“I’ve hired hundreds of workers during my [17-year] career here, and I’ve never had somebody turn down a job offer because of the benefits,” she said.
More than half, 56 percent, of workers who are offered so-called cafeteria-style benefits are taking advantage of them, according to Hewitt Associates, a large benefits-services firm in Lincolnshire. At some companies, usage is as high as 90 percent. “We’re seeing a lot of employer interest in these plans,” said Ken Sperling, a Hewitt consultant.
FedEx doesn’t disclose its health-care costs, but officials acknowledge the change was designed to cut expenses as well as offer more choice.
How can workers and employers alike be cutting costs at a time of double-digit health-care inflation? There’s the rub.
Health-care costs aren’t predictable–some people will buy rich coverage that ends up not being used, while others who take the basic coverage will get stuck paying higher out-of-pocket expenses when a sudden injury or illness happens.
If people were able to predict expenses exactly, costs would rise for employers because the healthy would be paying in less and the sickest would still have to be covered, said Sperling.
“In reality, medical costs are not that predictable, and you have people moving in and out of different plans all the time,” he said. That inefficiency, he said, results in a pooling of risk that basically washes out as a neutral for employers. In turn, however, it heightens employees’ risk.
In the first year of the FedEx plan, employees tended to “buy up” to richer benefits than they actually needed, said benefits manager Michelle Ward. Now, in the second year, employees on the whole are buying fewer enhanced options.
If all this has a familiar ring, it should. As consumers increasingly own their health care as well as their retirement planning, avoiding being on the wrong side of the inefficiencies is going to be crucial.
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In theory, unencumbered investors are now more free to make big stock market gains for their retirement. Of course, it also takes choosing a plan provider that will keep costs low and choosing the right investments. As for the latter, that is just about as difficult as predicting how much health care you’re going to need.
“For a long time, consumers have been disassociated with the cost of health-care services,” said Sperling. As more employers shift health costs to workers, their decisions are going to change, he said.
All the more reason, he said, to take a closer look than ever at the medical benefits package before jumping to that next job.
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E-mail Janet Kidd Stewart at [email protected].