Biglaw, Health Care / Medicine

Biglaw Compensation Leader Makes Costly Changes To Its Health Insurance Plan

Is your firm planning to institute serious changes to its health insurance plan in 2016?

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stethoscope on cashEarlier this month, Debevoise & Plimpton unveiled a change to its health insurance plan that angered its associates. The firm would not only be increasing payroll deductions for the insurance, but it would also be increasing copays and out-of-pocket maximums, and tacking on a monthly spousal surcharge to encourage married employees to get their loved ones off the firm’s plan.

At the time, we wondered what other Biglaw firms were planning to do with regard to their health insurance plans, and now we’ve got an answer from at least one leading law firm.

Davis Polk & Wardwell, the firm that brought associates bigger and better bonuses last year, is now a firm that’s bringing its associates a high-deductible health insurance plan. Individuals will have a $1,750 deductible in 2016, while families will have a deductible of $3,500. Out-of-pocket maximums under the new plan are also on the rise, at $3,500 for individuals, and $7,000 for families with in-network providers. This costly plan will be the only one available to all of the firm’s 1,265 employees across the country.

Here are some additional details from Law 360 (sub. req.):

Adam Okun, executive vice president of Frenkel Benefits LLC and the primary consultant on the Davis Polk plan, said high-deductible plans — increasingly common at major employers but unheard of in BigLaw as a sole option — are designed to put employee “skin in the game” in terms of rising health care costs.

“Effectively, the business case behind this kind of plan is [the employer] saying, ‘We want you to be judicious about health care spending just as you would be about any other expense, and in exchange we’re going to give you some funds,'” he said.

If employees shop for lower-cost health care options or otherwise keep their medical bills down, leftover savings account contributions “can then act as part of your retirement savings,” he said.

The reference to “savings account contributions” reflects how Davis will be offsetting the higher deductibles by graciously kicking in $1,000 per year to single employees’ health savings plans, and $2,000 per year for families covered under the insurance plan. All before-tax contributions to these plans will roll over year-to-year. On the bright side, the firm is also toying with the idea of building a health center at its New York office, where nursing staff will offer primary care options and prescribe some medications. Associates won’t even have to leave work to get medical attention; this is truly a workaholic’s dream.

According to Okun, “There is a herd mentality as it relates to law firm compensation and benefits, and it’s uncommon to see a firm step out and make such a dramatic redesign of their program like this. I think what ultimately persuaded [Davis Polk] was seeing so[me] clients adopt this as a more economically efficient way to deliver health care.” What a wonderful way to describe the follow-the-leader methodology Biglaw firms typically employ when it comes to their compensation and benefits.

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Davis Polk is now regarded as a leader of the pack when it comes to compensation, but will other firms fall in line behind the firm when it comes to high-deductible insurance coverage? If so, we’ll be left to wonder whether a pay raise will come to the fore in 2016 — otherwise employees will be scrambling to afford these high-class plans.

Is your firm instituting serious changes to its health insurance plan in 2016? Please drop us a line, and send us any documentation you’ve got. We’d love to hear from you.

Davis Polk 1st BigLaw Mover To High-Deductible Health Plan [Law 360 (sub. req.)]

Earlier: Leaked Memo: Which Biglaw Firm Is Gouging Employees On Health Insurance?

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