One of the most important components of any company’s financial planning is the unpredictable cost of health coverage. In the interim, it is beneficial to review some common ways to control the rising cost of your health insurance and to spend the least amount of corporate dollars.
1. Change coinsurance and deductible levels. By simply raising calendar year deductible and/or coinsurance levels you can decrease costs by 20-25%.
2. Introduce HSA’s, FSA’s, TSA’s, Cost Sharing to your plan.
3. Cancel some benefits. By sending your employees health care questionnaires, you can evaluate how certain benefits are being utilized. It may be beneficial to cancel some benefits that are not popular to your group.
4. Share the cost with your employees. You may find that some of your employees are insured under their spouse’s health plan as well as yours. They may opt-out of your plan if your plan is no longer free. For those who stay in the plan, you should offer a Section 125 plan to enable the employees to contribute their share on a pre-tax basis.
5. Offer HMOs, PPO’s, or managed care. This will enable your employees to get low-cost preventative care. Offer a High and Low plan, pay for the Low plan, and let employees buy up for the High plan.
6. Reevaluate your company’s Sick Pay Policy. Consider not paying for the first few days or offering rewards to employees who do not use up their sick day allotment. Sick days are often abused and add to the overall cost of health coverage.
7. Offer Voluntary Plans. If costs are too high and you cannot afford to share the premium, offer Voluntary Life, Dependent Life, Dental, and Long-Term Disability. This will enable the employee to purchase insurance at group rates and will show that you really care about your employees.
Some Definitions
Broker—A licensed insurance professional who represents the insurance purchaser in the acquisition of insurance coverage.
Cafeteria Plan—A flexible plan is generally one that complies with the requirements of Section 125 and offers a choice of two or more “qualified benefits” or a choice between cash and one or two more “qualified benefits.”
Capitation—A form of payment used by HMOs. Members pay a preset fixed fee for which they receive as much health care service as needed. This is an alternative to a fee for service arrangement.
Carry-over deductible—An arrangement that allows expense incurred in the last three months of the plan year, which were applied to that year’s deductible, to be carried over to the following year and counted toward satisfying the new year’s deductible.
Coinsurance—An arrangement that apportions expenses between the covered individual and the insurer. For example, 80 percent to be paid by the health insurer and 20 percent by the employee.
Cost Sharing—The apportioning of health care between plan and individual participants through employee contributions, deductibles, and coinsurance.
Deductible—An amount that a covered individual must pay before an insurance program begins reimbursing for expenses.
Dual Choice—The requirement that upon request certain employers must offer a federally qualified HMO as an alternative to its conventional health plan.
HMO— (Health Maintenance Organization) An HMO provides comprehensive health care for a prepaid fee.
Managed Care—A health care program that imposes some controls on the utilization of health care services. Another definition would be the providers who offer such care and/or the fees charged for such services. Managed care is provided through HMO’s, PPO’s, Managed indemnity plans, etc.
PPO— (Preferred Provider Organization) A health care provider arrangement whereby a third-party payer contracts with a group of medical care providers that agree to furnish services at negotiated fees in return for prompt payment and a guaranteed patient volume. PPO’s control costs by keeping fees down and curbing excessive service through stringent utilization control.
Cara Lovenson is president of Plan Professionals, Inc., a licensed insurance consultant located in New York City. She can be reached at 212-697-2000, or by e-mail at cara@planprofessionals.com. Her Web site is planprofessionals.com
