Virtually a third of all health-insurance premiums increased by 30 percent or more over the past couple of years. At that rate, the average cost of health insurance per employee will soon surpass $3,000. Seventy-three percent of senior executives believe health-care expenses will continue to increase 20 percent or more each year over the next three years. The message here is clear: If you haven't previously gotten serious about cutting your company's health-insurance costs, now is the time. It can be done. The first thing you should do is learn how the system works--or doesn't work. Most small employers spend less than four hours a year thinking about their company health plans. Learn what your options are. Your insurance agent can help you shop for less expensive plans. But don't stop there. Compare plan benefits, insurance-company records, and service guarantees.
Consider Blue Cross and Blue Shield plans and HMOs (health-maintenance organizations), even if your agent doesn't handle them. The Blue Shield plans in some areas, offer clear advantages to small companies. Experts look upon HMOs as the best buys in health care. Find out if your company is qualified for new, economical health insurance plans now available in five states. In addition, foundation-funded pilot projects in several parts of the country are indicating that it is possible to cut health-coverage expenses 30 to 40 percent. In short, health insurance isn't as simple as it once use to be. And the swiftness of change is accelerating, offering new hope for a ceasefire in the business battle with exploding health-care costs. The next few years present as much potential for change as at any time in the past two decades. You can be part of that change by putting at least some of the following ideas to work for your company.
1) Boost Insurance Cost Sharing By Employees
This proposal is at the top of every consultant's list. Small companies have a propensity to pay far more of their workers' total health-care bill than large companies do. Yet study shows that insulating employees from the costs of care encourages needless use of health services. Fifty-two percent of the companies responding to the Nation's Business health survey said they pay 100 percent of their employees' health-insurance premiums. But 45 percent said they intended to implement or increase employee contributions to these premiums. An equal number said they plan to boost employee deductibles. Insurance companies first attached $100 deductibles to major-medical plans in the early 1950s. But 40 percent of employers still set deductibles at $100 or less. Raising a $100 deductible to $250 would cut premium costs for single coverage by about 11 percent. A $500 deductible would cut costs by about one-fourth. A $1,000 deductible would save about one-third.
2) Allow Your Staff To Pay For Health Premiums With Tax-Free Dollars
Set up a so-called flexible expenses account, which allows your employees to pay their share of health-insurance premiums and un-reimbursed health-care expenses with pretax dollars. A flexible costs account could save employees 20 cents to 35 cents on the dollar, as state and federal income taxes and Social Security taxes are not imposed.
In addition, the company saves by reducing the workers base income on which it pays Social Security and other taxes. Employ an outside payroll bookkeeping firm to handle the formalities. You can pay the service fee and still come out with a net savings. The monthly operational fee would run between $2 and $5 for each employee.
3) Relocate High-Risk Staff To The State's High-Risk Pool
Insurance premiums climb whenever someone in a small-group plan becomes very ill with a major disease or illness. As an employer, you should investigate the option of moving your workers with serious health troubles into a state high-risk pool and then negotiating a lesser premium for the healthy members of your group.
4) Switches To An Open-Enrollment Blue Cross And Blue Shield Plan
Blue Cross and Blue Shield plans operate as de facto high-risk pools in a number of states by providing "open enrollment" periods during which any group can buy insurance. Among the 74 Blue Cross and Blue Shield organizations countrywide, 21 offer open enrollment. All the plans once used community rating to set premium levels. But that began to change in the 1960s when commercial insurers started to tempt firms with low risks by offering them cheaper health insurance.
5) Replace Your Conventional Health Plan With An HMO
Unlike traditional health insurance, HMOs cover all medical needs, including routine preventive care, for a flat monthly fee that characteristically is less expensive than traditional health insurance. What is more, two types of HMOs, the staff and the group models, have demonstrated themselves to be more effective at controlling costs than any other form of health-care delivery. Staff models employ physicians directly and put them on wages.
