Small employers will lead healthcare change in California.

Consumer Directed Health Plans, which are being used by large employers across the country, are finding a home with small employers in California.

As the price points for comprehensive healthcare plans--HMOs and PPOs--have increased and made the cost of providing employer sponsored healthcare expensive, Consumer Directed Health Plans are becoming a very attractive alternative for small employers.

The benefit and source of interest in Consumer Directed Health Plans is found in the way their employees and families actually use their healthcare services. National studies indicate that 70% of employees and their families use less than $150 of their medical benefits in a year; and 8% of employees and dependents use 68% of all the benefits. Such a disparity in utilization of services has begged some important questions for employers:

1) Why am I incurring 13% to 18% annual increases when very few of my employees are using my health plan?

2) Why don't insurance companies design plans that pay very well for routine and preventive care, combined with strong catastrophic benefits, and see if there is a savings?

Well ... the insurance companies have designed such plans and they are called Consumer Directed Health Plans. The new plans give employees a healthcare spending account of $1,000, followed by a deductible, then a major medical plan with good catastrophic protection.

Where Consumer Directed Health Plans are working for large national firms, the plans can also offer the small employer in California significant advantages:

Cost Control: In addition to the savings generated by separating the routine preventive services from the catastrophic protection, small employers are finding very competitive pricing for the new plans. These lower costs are driven by insurance companies' efforts to extend coverage to uninsured employees working for small employers.

Employee Value: The flexibility of the new plans and stronger preventive benefits are more useful and effective for small employer benefit plans that previously had little flexibility within a single comprehensive plan.

Employer Knowledge and Culture: Small employers know the age, general health, and corporate culture of their business and can easily determine if the new Consumer Directed Health Plans will be of benefit to their employees and families.

All employers are trying to grapple with the increasing costs of healthcare and in California, with the new Consumer Directed Health Plans, small employers have a real opportunity to take a leadership position.

Malcolm Cutler, Jr. is with Epic Century Benefits. For more information, please call 323/936-9400.