This edition of MRM's "Ask the Expert” features advice from Trion Group. Please send questions to Modern Restaurant Management (MRM) magazine Executive Editor Barbara Castiglia at firstname.lastname@example.org.
The logic with high deductible plans and consumer-driven strategies in healthcare used to be that participants would be more judicious in spending their dollar for medical services. Why doesn’t that logic work in the hospitality sector – especially in the current labor environment?
If the objectives for any benefit program are to build plans that are 1. well perceived by the participants, and; 2. are offered at an affordable and stable cost, then High Deductible Health Plans (HDHP) fail at both for the hospitality workforce.
The Affordable Care Act (ACA) “encouraged” hospitality employers to offer health coverage to all full-time employees and not just their managers. To accommodate the law, most employers in this sector either extended their existing plan if it was something close to a 60 percent actuarial value, or they offered a standard 60 percent plan from their carrier.
Typically, high deductible plans are only effective if used in concert with a financial tool, such as a Health Savings Account (HSA), Most restaurants do not make company contributions to a HSA plan and communicating the tax advantages of personal HSA contributions is difficult. As such, this led to low plan participation and usage among the hospitality workforce, which translated into poor employee perception among those employees.
We believe that restaurant employers now have the opportunity to consider a value proposition that better fit employee needs and ensures cost management. And we believe it is possible to build plans with co-pay designs and an actuarial value in the same 60 percent neighborhood as a HDHP. This results in a number of advantages:
- With co-pays, employees have a good understanding of their cost when they see a doctor, a specialist or buy a prescription.
- The financial barriers to obtaining primary care services are eliminated.
- Since the different plan options are similarly structured, employees better understand their choices. Many employees do not understand during the enrollment process that with a HDHP, they pay out of pocket for medical services until the deductible has been satisfied.
- Employees now have a medical plan they can use, meaning perception of their medical plan choices is better. Although preventive services are not subject to deductibles in HDHP’s, the usage of this benefit is so low with this population that it is not perceived as a meaningful benefit.
- From the employer’s perspective, plan costs may be somewhat higher on small items such as co-pays, but there are potential savings when deferred small items don’t grow into big costs. For example, with the HDHP structure, there is a tendency for chronic claimants to defer care, and, in our experience in this sector, deferred care frequently means skipped care. A recent study published in the medical journal Circulation corroborated our experience, noting that poorly designed coverage can lead to worse medical outcomes. This means problems that could be contained for $5,000 annually can fester into a $40,000 or $80,000 plan expense. This leads to plans where it is difficult to forecast cost.
- The opposite of a HDHP is a minimum value plan. It pays first-dollar coverage for doctors’ office visits, prescription drugs and testing. It does not include benefits for high-cost services such as hospitalization. This means some employees will find this to be an attractive option.
Overall, cash will remain the most attractive inducement to attracting new workers. Our enrollment data indicates however, that employees have become more interested in benefits since the pandemic. The key to capitalizing on this dynamic is developing a benefit structure that is appealing to this workforce without being too costly. The restaurant industry is different from other sectors, so the benefit structures have to be different as well.