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Employers Can Slash Health Insurance Costs, Limit Impact on Employees, Jim Edholm Writes

Posted on: Friday, 12 October 2007, 21:00 CDT

Employers have more weapons to slash spiraling health insurance costs than they think, broker Jim Edholm writes in IndUS Business Journal.

"Most carriers have a wide range of plan options to choose from, and used creatively, they'll help dramatically lower your cost," Edholm writes.

Employers who are willing to pick up some of the risk will get a price break. They should look at adjusting options for the three major components of health insurance: doctor visits, prescriptions and hospitalization or surgery.

"In choosing a health plan design to reduce premium costs, there are two questions to answer. First, how much will you save with a given plan design? And second, how will you share it with your employees?" Edholm says.

Increasing doctor co-payments from $15 per visit to $25, hiking prescription co-payments by $5, and going from $250 deductible to a $1,500 single/$3,000 family deductible for hospital/surgical admissions, you can save nearly 31 percent in Massachusetts. A 50-employee company might save $124,000.

Modest raises in the cost of doctor visits and drugs will probably be more acceptable to employees than raising their share of the premium. However, employees facing hospitalization or surgery would see their cost jump from $250 to $1,500, which is harder to swallow.

To cushion the blow, the company can absorb part of the cost for employees who have major bills. For instance, it could reimburse all out-of-pocket costs above $500 by establishing of a Health Reimbursement Arrangement (HRA). Reimbursements are deductible to the company and non-taxable to the employee.

Since only one in six Americans is hospitalized or has surgery annually, only a small fraction of employees will get reimbursements, limiting the financial impact on the company and improving its cash flow.

"HIPAA requirements forbid you from knowing anything about your employees' health conditions, so you'll probably select a third-party administration to handle claims. At about $5 per employee per month, that TPA would administer the program. Or, the health insurer can provide the HRA reimbursements," he says.

Read the full article at Jim's website: www.Group-Insurance-Guide.com

Jim Edholm is President of Business Benefits Insurance, an employee benefits planning firm in Andover, MA. He has worked with employers for more than 25 years.

Source: Business Wire

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