Health Care Costs Projected to Jump By 14.1%

Based on input from actuaries at leading health care insurers, claims costs for health maintenance organization (HMO) and point-of-service (POS) plans are projected to increase 14.1% on average for 12-month coverage periods ending in September 2005, according to Aon Consulting's Spring 2004 Health Care Trend Survey.

For the first time ever, Aon also forecasted the rate of increase for companies using consumer-driven health plans; it found that trend rate would also be 14.1%. However, an Aon spokesman cautioned that the latter percentage should not be taken out of context.

"It's important to look at overall cost for health care programs," said Senior Vice President Bill Sharon who directed the study. "Our analysis reveals that a company can realize first year savings of up to 8% of their cost if they implement an effective consumer-driven health care strategy. So, although consumer-driven plans will likely see the same level of increase as other coverage plans this year, considerable savings will still be recovered by making the switch. It all depends on the financial incentives and the resulting changes in consumers' health care consumption."

Sharon noted that consumer-driven plans are expected to be an even more attractive model in years to come. "Early returns on the impact of consumer-driven plans have been positive. Significant reductions in unnecessary care have been charted. Once the actuaries begin to see these results continue year [after] year, we predict that this will be reflected in trend rates and future trend lines will drop lower than other plan models."

Perry noted that the role of biotech-derived injection medications—primarily used to treat high-cost disease states for which previous treatments may have been more invasive or unavailable—will be important for companies to watch. She noted that current estimates are that only 5% of total prescription drug costs are from such drugs, but their cost impact on health plans will become more pronounced as their use increases.

Some HSAs Exempt From ERISA Status

Health savings accounts (HSAs) that meet certain conditions will be exempt from Employee Retirement Income Security Act (ERISA) regulations, according to guidance issued by the U.S. Dept. of Labor's Employee Benefits Security Administration (EBSA).

EBSA took the action with the aim of encouraging more employers to use health savings accounts with a high-deductible health plan. HSAs would be exempt from ERISA plan status if they meet conditions outlined in Field Assistance Bulletin 2004-1.

According to that bulletin, the exemption would apply to HSAs that are completely voluntary for employees, do not limit the ability of participants to move funds to another HSA, do not impose conditions on the use of the funds or make or influence investment decisions. In addition, the HSA must not be represented as an employee welfare plan and the company must not receive any payment in connection with the HSA.

EBSA noted that HSAs are "personal health care savings vehicles rather than a form of group health insurance. . .funds deposited in an HSA generally may not be used to pay health insurance premiums, and the beneficiaries of the account have sole control and are exclusively responsible for expending the funds."

According to the bulletin, a group health insurance plan "typically establishes the type of benefits provided, the conditions for their receipt, and the manner in which claims will be adjudicated." With HSAs, the employer may be doing little more than contributing funds to an account controlled solely by the employee.

Susan Relland, legal counsel for the American Benefits Council, said some employers are considering accepting ERISA responsibility if it means they can impose more control over HSA spending. "There's nothing. . .that keeps the employee from just cashing out the HSA, taking the 10% excise hit, and (spending the money). Employers. . .would like to make sure that. . .they control the account, that it's being spent on health care."

Every Other Worker Has Paid Sick Leave

Only half of all employees in the United States have paid sick leave and that fact can have "unhealthy" repercussions for maintaining a more productive workforce, according to a report issued by the Institute for Women's Policy Research (IWPR) in Washington, D.C. The report, No Time to be Sick: Why Everyone Suffers When Workers Don't Have Paid Sick Leave (2004), was based on data from the U.S. Department of Labor.

Highlights from the report include:

• Nearly 60 million workers go without paid sick leave.
  
• Only one in three workers have paid sick leave to care for sick children, forcing more than 85 million workers to choose between keeping their jobs and caring for their families.
  
• Workers in state and local government are twice as likely to have sick leave coverage as private sector workers (89% vs. 45%).
  

Vicky Lovell, director and author of the report, said: "It is shocking to see that only half of all workers are able to take paid time off for health-related reasons. Paid sick leave is not just an employee benefit; it also serves as an important work support by allowing for a healthy, productive, and efficient workforce."

The study recommended that existing paid sick leave programs be expanded and that a wage replacement be added to unpaid sick leave programs. In addition, the study urged paid sick leave programs to allow for the care of sick family members, as well as making work schedules more flexible so workers can adapt their hours to fit the demands of their health-related caregiving responsibilities.

IWPR is a public policy research organization dedicated to informing and stimulating debate on issues of critical importance to women and their families. The full No Time to be Sick. . .report can be found at www.iwpr.org.

FMLA Rights Not Communicated; Legal Suit Allowed

Because a company failed to notify an employee of his rights under the Family and Medical Leave Act (FMLA), the Third Circuit U.S. Court of Appeals has decided that the em-ployee may proceed with a lawsuit against the company (Conoshenti v. Public Service Electric & Gas Company, No. 03-2257).

Richard Conoshenti began working as a mechanic for the Public Service Electric & Gas Company in 1972. In April and May 1999, the company accused Conoshenti of keeping inaccurate time records and leaving his shift early. Conoshenti replied he had simply corrected inaccurate time records and that he left his shift early because chemicals he had been working with irritated his skin and he needed to take a shower. Nevertheless, the company decided to discharge Conoshenti.

Upon advice of his union, however, Conoshenti entered a "last chance agreement" with the company. The company agreed to reinstate Conoshenti upon condition of his meeting a number of obligations that were outlined in the agreement. Those obligations included passing a physical exam, reporting to work on time, and maintaining satisfactory work performance. From August 10, 1999 to December 3, 1999, Conoshenti had met his obligations under the agreement. On December 4, 1999, however, he was struck by a car and required hospitalization. Two days later, Conoshenti informed his employer about the accident and the seriousness of his injuries. A physician said Conoshenti would need to be out of work for at least two weeks in order to recover. The company did not notify Conoshenti at that time, or at any time thereafter, of his rights under the FMLA, such as his right to take 12 weeks' leave.

Despite these circumstances, the company took steps to terminate Conoshenti for violating his "last chance agreement." Becoming concerned, Conoshenti contacted his union, which recommended that he notify the company that he wished to have his time away from the job count as FMLA leave. On December 27, 1999, Conoshenti sent a letter to his direct supervisor requesting the FMLA leave. When Conoshenti returned to work in April, he passed a physical exam but the company terminated him for violating the agreement.

Conoshenti filed suit in New Jersey State Court, alleging FMLA violations. The district court granted summary judgment in favor of the company. As a result, Conoshenti appealed to the third circuit court, which reinstated his FMLA claim.

"In this case, there is no dispute that Conoshenti was an eligible employee or that his injury qualified as a serious health condition," the circuit court stated. "Moreover, it is undisputed that Conoshenti fulfilled his duty to notify under the FMLA by informing (his supervisor) of his injury and the need for time off within two days of his accident." The court also cited the U.S. Dept. of Labor regulations which stated, a company is required "to provide employees with individualized notice of their FMLA rights and obligations."

Although Conoshenti's leave exceeded the 12 weeks allowed under the statute, the circuit court said: "Had (Conoshenti) received the advice (the company) was obliged to provide, Conoshenti insists, he would have been able to make an informed decision about structuring his leave and would have structured it, and his plan of recovery, in such a way as to preserve the job protection afforded by the Act. We conclude that this is a viable theory." As a result, the circuit court returned the FMLA claim to the district court for trial.