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Given the state of the economy it is more important than ever for businesses to evaluate their employee benefit programs to find ways to manage cost. Double-digit health insurance renewal increases should not be an automatic annual ritual, as there are many options available that can save your company money without sparing the quality of health care offered to your employees. The following are tips on how to reduce your costs:
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Explore your options
Research the insurance marketplace for competitive proposals. While there are only five or six major health insurance carriers in the marketplace, it is always good to get an outside professional opinion to provide fresh ideas and deeper market knowledge.
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Provide your employees with options at various cost levels. More than 75 percent of companies provide multiple health plans to employees, which is typically done with the same carrier. This “high/low” program is an outstanding way for an employer to both fix its cost of insurance while providing alternatives to employees.
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Review alternative contribution strategies. 401(k) plans typically have a five-year period before an employee is fully vested so why don”™t employers take a similar approach with their health and other benefits? In other words, you may want to consider providing different levels of benefits to various classes of employees.
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Cost-saving tips
Extend your plan”™s waiting period and to bridge the gap, add a lower cost plan option. Most turnover at a company happens during an employee”™s first six months of employment. However, most employers provide benefits after 30 to 90 days of employment. This dichotomy creates the potential for ex-employees, who are typically in the highest risk class, to choose COBRA on a company”™s health insurance program. By extending the waiting period, a company can decrease this risk and lower both its premiums and administrative burden. During the waiting period, “limited medical plans” can be used as an inexpensive way to provide basic benefits.
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Investigate adding a health reimbursement account (HRA). An HRA is enabled by IRS code section 105, allowing an employer to fund an account that can be directed toward an employee”™s out-of-pocket costs. A cost saving strategy that greatly reduces premiums is for an employer to buy a health plan with increased co-pays, deductibles and co-insurance. The employer can then set up a “shadow plan” for employees by funding an HRA. The HRA provides a debit card to each person to pay for qualified medical expenses between the shadow plan and the actual insurance plan. The risk is minimal for an employer and the savings can be as great as 20 percent.
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Bundle multiple lines of coverage with one insurance carrier. Carriers usually offer significant discounts when a company buys more than one line of insurance from them. By combining dental, life and disability together or with medical, companies can realize savings on all of their premiums. Separate your prescription plan and investigate self-insuring through a third-party vendor.
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Be proactive
Educate your employees on becoming wise health care consumers and healthier people. Employees must take charge of their own health by making healthier decisions such as quitting smoking and losing weight. Smoking is the leading cause of preventable death in the U.S. while obesity is the second leading cause. Some interesting facts to consider are that 127 million adults in the U.S. are overweight and 60 million are obese. Obesity has a direct correlation to heart disease, stroke, high blood pressure, blindness, kidney disease, nervous system disease, pregnancy complications and diabetes. In 2007, the National Institute of Health estimated that 23.5 million Americans, or 10.7 percent of all people age 20 or older, had diabetes. The majority of those with diabetes have type II adult onset that is primarily caused by obesity and other lifestyle factors. The average diabetic has 2.3 times the medical expenditures of a healthy person annually.
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Thom Mangan is president of the employee benefits consulting division of HUB International, which includes Fairfield County. Reach him at Thomas.Mangan@hubinternational.com.
