In our nation's ongoing health care debate, the term "Cadillac health insurance" gets plenty of play. In fact, so-called Cadillac coverage became one of the cornerstones of President Obama's health care reform legislation, which includes a tax on these expensive insurance packages starting in 2018 to help offset the cost of expanded health coverage nationwide.
So, what exactly is a Cadillac health insurance plan? Moreover, what does the future hold for these historically elite programs?
According to the final version of the 2010 Patient Protection and Affordable Care Act, Cadillac health insurance is defined as any health insurance plan with annual premiums greater than $10,200 for individuals or $27,500 for families. Industry experts say these plans typically have no deductibles, require low (or no) co-payments for physician visits or prescription drugs, and contain few restrictions on what procedures are covered. It's the veritable carte blanche of health insurance plans.
Who gets it?
While it isn't unheard of for an individual or family to purchase such a plan on the open market, Cadillac coverage historically has been offered to senior-level corporate executives or public-sector union employees. In 2009, for example, as debate about taxing high-cost plans swirled, various administration officials and news outlets cited one of the perks Goldman Sachs supposedly offered its executives -- a health insurance package with an annual premium price tag of $40,000. Goldman Sachs never confirmed that number.
"A company would often provide a core health insurance plan to its rank-and-file employees, but also fully fund these so-called Cadillac plans for its high-level executives," says Dorothy Miraglia, a principal with AlphaStaff, a human resources outsourcing company that creates customized insurance plans.
Twenty years ago, about 20 percent of companies in the United States offered these types of expensive health packages (sometimes called medical expense reimbursement plans) to their executives, mostly as an incentive for hiring or retention, Miraglia says.
"But that's definitely not something you see very much nowadays," she says. "For all intents and purposes, (these) plans won't exist in a few years."
The reason for the decline in this trend is twofold. On one hand, many of these plans no longer comply with today's employee anti-discrimination standards. It's illegal for executives to be offered one type of health care package while the company's rank-and-file are offered another.
"Also, you see more costs being shifted to employees across the board," says Mary Chandler, director of health care actuarial services at CBIZ Employee Services. "The prevalence of those rich benefits has gone by the wayside as the cost of health care has increased so rapidly and eaten into profits. I know some teachers' unions that still have those types of benefits, but things like no co-pays or no deductibles have had to change."
Instead of offering Cadillac health insurance plans, many companies now provide (or share the cost of) executive health programs, such the one offered by Robert Wood Johnson University Hospital in New Jersey. Tailored toward senior corporate employees, executive health programs provide services like exhaustive, annual health examinations and individualized physician consultations. For instance, Robert Wood Johnson University Hospital's executive health program offers a five-hour executive examination that includes everything from complete blood studies to a cardiac stress test, nutrition consultation, chest X-rays, and a hearing and vision screening.
"It's a service several companies want to offer their executives in order to keep them in good health and allow them to be more productive for the company," says Dr. Michael Steinberg, an internist and associate professor of medicine at Robert Wood Johnson University Hospital. Aside from the $700 concierge fee, most executives enrolled in the program don't have to spend any money out of pocket.
Protecting the bottom line
Preventive care often is something that falls by the wayside amid demanding careers and long hours.
"Busy executives and businesspeople have a tough time finding the time to take care of themselves in terms of health care, especially preventive and routine health maintenance," Steinberg says.
A greater focus on preventive exams is where executive health is heading, says Dr. Miles Varn, chief medical officer for PinnacleCare, a health advisory firm that works with organizations seeking benefits to protect their key employees.
"A lot of people equate great health insurance with great health care, but that's not true at all," he says. "Low deductibles and fewer out-of-pocket costs don't necessarily get you better health, and I don't know that a traditional Cadillac health insurance plan is really giving you the most benefit."
Executives who belong to PinnacleCare's enterprise membership are entitled to complete health management, which entails a PinnacleCare private adviser who manages everything from scheduling health and medical appointments to managing personal health records. Moreover, every participating executive works with a team of health advisers who are well-versed in the executive's health care needs, concerns and objectives.
"Executive health plans are evolving," Varn says. "It's no longer just about Cadillac insurance. It's a combination of insurance-based benefits and personalized preventive medical services."