Employers support competing market of benefit administrators
A New Benefit Platform for Life Security
The ERISA Industry Committee
May 2007
The ERISA Industry Committee (ERIC) is a non-profit association committed to the advancement of the employee retirement, health, and compensation plans of America’s major employers.
Overview
- The new proposed structure would give employers an alternative method for providing benefits without the “entanglements” of traditional provider sponsorship.
- This structure complements but would not require replacing the current system for those who find the current system more appropriate.
- The new benefits offerings would be administered by competing Benefit Administrators.
- Benefit Administrators, in many respects, would assume the role of today’s plan sponsors and, particularly with regard to health care, would be organized on a geographic basis.
- Employers and individuals would share funding of benefits.
- In addition, the structure would also provide a way for individuals to purchase coverage independent from an employer relationship.
This is an urgent debate. The life security of millions of Americans, as well as the viability of many American businesses, depends on the outcome. Through ERIC, the major employer community welcomes the dialogue that will change the status quo in a way that meaningfully addresses the life security needs of all Americans while improving the competitive position of American employers.
The foundation of ERIC’s proposal is our belief that health care and health care financing are best managed in local/regional major medical markets. The Benefit Administrators that are the core of ERIC’s proposed new structure and their affiliates would be in a much better position than individual employers to bring entire communities together to create a rational and accountable health care system.
Community-based systems
ERIC’s proposal would require the federal government to establish, or facilitate the establishment of, community-based structures with the following attributes:
- Standard benefit plans - Low-cost benefits options also would be available.
- Individual access to health plans - independent from employment
- Individual mandate - There would be a federal mandate (with standards established at the federal level) that every American individually be covered by a plan sponsored by a qualified Benefit Administrator or through some other qualified system.
- Subsidies for financially disadvantaged persons
- Employer role in funding health benefit plans - Each employer would determine the contribution it would make available for the purchase of a standard health benefit plan. The employee would be required to pay the difference.
ERIC believes a properly designed pluralistic system will be far superior to a single-payer system for correcting the deficiencies in the current system and for producing significant improvements in both cost and quality.
http://maxx.eric.org/uploadFiles/B86A00000009.filename.ERIC_New_Benefit_Platform_FL0614.pdf
Comment:
By Don McCanne, MD
Most of America’s largest employers are self-insured for their employee health benefit programs. Rather than insurers, they use benefit administrators in compliance with the Employee Retirement Income Security Act (ERISA), which are exempt from the requirements of state insurance regulators.
Traditionally, large employers have provided very generous health benefits for their employees. Current trends have increased the financial burden on employers as they try to meet these legacy costs. Factors include an increase in the ratio of retirees to the workforce, international price competition, escalating health care costs, and a shift from a manufacturing economy to a service economy.
Large employers want relief. But they do not want to have their employees’ health benefits controlled by either the government or private insurers. They want to maintain the role of benefit administrators operating in a less intrusive regulatory environment.
They realize that the medical bills must still be paid. So what do they recommend? They say let’s continue to use benefit administrators, but let’s shift the responsibility of funding the heath care reserves to the employees through a federal individual mandate, while allowing the employer to decide what optional contribution it would like to make toward the employees’ mandated obligations. Sounds like a good deal - for the employers.
Who are these benefit administrators anyway? Well, quite simply they’re administrators who administer the health benefits offered by employers to their employees. But they are not insurers. Their medical loss ratio is zero. 100 percent of revenues are spent on administrative services plus profits. They are part of the administrative excesses that plague our health care system (though not quite as wasteful as the private insurance industry).
ERIC recommends creating a market of competing benefit administrators, enabling the individual employee/consumer to select the greatest value in health care administration. What are they selling? Administrative services theoretically designed to reduce spending on actual health care services. Allegedly an ever increasing amount of administrative services would produce even greater decreases in health care spending. Just imagine what they could sell us or broker for us: claims processing, provider contracting services, provider discount cards, medical debit cards, disease management contracting, information technology services for personally-owned medical records, club memberships for preventive exercise regimens, discount membership programs for healthy food choices, financial services to manage our own personal health accounts, travel arrangements for outsourced health care services, etc. With new innovations that characterize the free marketplace, the potential list is endless.
Big business knows that if they quit paying the bills, single payer is inevitable. But what a feeble response - pretending that dumping more administrative excesses on us will magically reduce health care spending while keeping the government out.
Big business does need relief. But what they really need is an administratively-efficient, equitably-funded single payer system. If they were smart, they would realize that it’s time for them to schedule retirement banquets for their benefit administrators to thank them for their many years of service. Some will find employment in the single payer system, but with the superior health benefits that we would all enjoy.