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Employers Committed to Control Health Insurance Costs Offers Alternative Health Care Cost Control

Posted on: Thursday, 19 January 2006, 21:00 CST

By Erin Conroy

The country is facing a health care crisis as the cost of health insurance increases by 12 percent to 15 percent each year. Today, about 46 million Americans do not have health insurance, and most of those uninsured people have jobs.

The federal government has proposed ideas to help employers curb increasing cost by passing laws that might give some relief. But one local brokerage company suggests employers are better off on their own when it comes to curbing costs.

The Small Business Health Fairness Act, passed last year, created Associations Health Plans that allows small businesses and entrepreneurs to team up with large trade associations to negotiate lower health insurance rates through collective bargaining.

The AHP precursor was the Health Savings Account, part of the Medicare bill President George Bush signed in December 2003. An HSA is a savings account employees pay into before taxes and can access when necessary for medical expenses. These are usually paired with high-deductible health plans, which have lower premiums. So employees pay less in premiums but have the money in their HSA to cover any major medical expenses. However, this approach works best with predominantly healthy people who do not use their health benefits frequently.

Howard Danzig, president of Employers Committed to Control Health Insurance Costs, a Midwest-based group that works as a brokerage firm, suggests another solution to the high cost of health care.

Called cost-management health insurance, ECCHIC's approach is to advise its clients on how to buy their own employee health insurance without paying hefty premiums. Clients range from a $4 billion Save- a-Lot grocery chain to small entities like the Creve Coeur Fire Department.

Danzig explained that insurance companies are no more than an office for accounts payable; they do not provide health benefits. Insurance companies buy medical services from a network of providers and resell those services to people at a 30 percent to 40 percent markup, he said.

With the system Danzig suggests, employers purchase the same medical services an insurance provider would through the network at wholesale prices. In order to do this, employers have to know their health care costs year to year. They would need to look at an itemized listing of drugs and services needed for each employee in order to purchase the correct amount of services, plus a little extra for emergencies, for the coming year.

Known health care costs as well as unknown costs are a lot easier to predict than insurance companies lead people to believe, Danzig said.

In addition, the employer would need to have a company underwrite the services purchased and hire an administrator firm to keep on top of paperwork and claims.

Danzig's firm acts as the general contractor for the employer, gathering together the network of medical services, prescription drug companies, underwriters for the plan and administrators for the plan. Even though the employer would have to pay a small premium to the underwriter of the plan, to the administrator and to ECCHIC for brokering the deal, Danzig argues employers will still save more money than what they would have paid an insurance company to do the same thing.

What the insurance companies are doing is buying medical services at a discount and reselling them to consumers at a 30 percent or more markup, said Danzig. It is astonishing how much excess is built into front-end costs. That's what we've educated employers to recognize.

We're buying at the same wholesale price as the insurance companies, said Danzig. Every group that we're working with right now is spending less for the same benefits than they had been spending.

Danzig says his approach differs from HSAs and AHPs by teaching employers how to manage their costs and avoid overpaying.

Danzig has been using this formula for employers since 1990. ECCHIC began in 1997 as the network structure and formula evolved. He works with three agents in his St. Louis office and several associates throughout the Midwest.

ECCHIC hosts monthly lunch seminars for employers. For more information, log onto http:// www.ecchic.com.

Source: St. Charles County Business Record

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