Low-Cost Health Insurance:An OxymoronWritten By: GARRY BARTECKI
Article Date: 09-01-2005
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.
It's been a long time since you could reduce your health insurance costs.
For as long as I can remember, all we've heard is "Health insurance premiums are going up another 25 percent this year." And up to this point your options to change this trend have been limited. You could re-bid your health insurance every few years, pass as much of the increase to employees as possible, reduce coverage, increase deductibles, lease employees, or explore industry group plans.
Nothing worked for long. It seemed there was nothing you could do to control health insurance costs except offer no coverage. Until now.
Now, you have one option to explore that may provide some relief: the new high-deductible (consumer-driven) plans associated with Health Savings Account (HSA) and Health Reimbursement Arrangement (HRA) programs.
I usually stay away from discussing health insurance, but after working with these programs the last six months, I believe this type of plan makes insured personnel more cost-conscious and they take a more active role in wellness programs.
In simple terms, these plans change the way medical claims get paid, requiring covered employees to pay 100 percent of claims up to a certain point, instead of paying co-pays. With that change in place, the insured is quick to learn how much they're paying and what it's for, and they begin to shop around to see if what they're paying is reasonable.
Currently, employees pay a co-pay for drugs, doctor visits and other medical procedures and there is usually some kind of overall deductible involved. Employees have no way of knowing what they are being charged in total for these products and services and often don't care because everything costs $20.
With the high-deductible plan, let's assume an employer sets aside the first $800 for a single employee and actually pays it into a fund for use by the employee. The first $800 of medical claims is paid by this fund and the employee has zero out of pocket costs.
The next $700 in claims, however, is paid 100 percent by the employee. Insurance isn't used until after $1,500 in claims are incurred. All of a sudden, the employee becomes very aware of what they're spending because it's coming directly out of their pocket, and they want to be very careful not to get to that point.
This is not as bad for employees as you may think. When you add up the co-pays and deductibles they pay annually, it's very close to the employees' portion of the claim coverage.
To make this even more interesting, the employer has the option of keeping any unused balance of the corporate portion in the insurance fund as a corporate asset available for transfer to the following year. This allows employees to "own" any unused portion of their fund balance. Most companies set a limit on how much an employee can accumulate as an unused balance, but if an employee could build up a $5,000 balance or so, good for them. It won't cost the company one single penny because you would have paid these funds to the insurance company in the first place.
The other cost-saving opportunities in these plans are the wellness programs, which offer incentives to encourage a healthier life style, and the cost information, which makes sure employees know what they're paying for products and services.
The benefits to employers are:
The down side is explaining the program to show the benefits (current and longterm) to employees. (I suggest you get a professional to make a presentation. Call me if you need a recommendation.)
- You should be able to stem the tide of annual increases.
- Offering an additional benefit program makes your job offers more attractive.
- Lower insurance premiums lower monthly employee contributions.
- The deductible fund could reach the point that you can lower monthly contributions.
- The deductible portion of your insurance cost (the $700 and $800 referred to above) is not subject to annual insurance industry market adjustments.
These plans may not be for everyone, but I'm convinced you should at least investigate the programs.
It's been a long time since you could reduce your health insurance costs. Now, however, you do have an alternative that may allow you to do so, while offering additional benefits to employees without additional cost. That's value for ALL employees, whether they're healthy or sick!
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