Top 3 Ways Employers Can Cut Health Insurance Costs

Instead of layoffs and unemployment, here are key ways for companies to save money and keep employees insured, while still staying competitive!

1. Replace co-pay plans with high deductible plans and health savings accounts. Passed by legislation in 2004, this is a good idea for employers who currently offer co-pay plans with relatively low out-of-pocket costs. Many employers have realized a 20-30% reduction in premiums. Part of the savings can be used to put money into an account “Health Savings Account” tax-free, which can then be used tax-free to cover a expenses going toward the higher deductible. If the money is not used this year, it rolls over into consecutive years. This is also purported to be a way to slow down the inflationary trend of health care costs. One reason health care costs are out of control is that there is no consumerism in health care. This allows employees to see the real cost of using the healthcare system, which is more than a small co-pay. There is an incentive to actually shop around or to make a decision on whether a certain expensive medical test is really necessary.

2. Increase co-pays and deductibles and/or increase the percentage an employee pays to buy the insurance. This is shifting costs back to employees in the form of either premiums or co-pays, or both. In this environment, the same $20 co-pay this year buys fewer services than it did last year, so it makes sense to increase the co-pay to $30. This, despite personal income has not kept up with the rate of healthcare trends. This is the most common way employers cut health care costs. Also, remember to use a Section 125 Cafeteria plan to allow the premiums and
co-pays to be paid by employees pre-tax.

3. Use a smaller network. Many insurers have a full HMO network, and then a more restrictive network from which to choose. The more restrictive network allows for the same
co-pay levels, but at a much lower premium. This type of network would eliminate visiting the highest cost providers and medical groups in a given geographic area.

Which is best…COBRA or Individual Coverage?

With so many people out of work, people are faced with the question of continuing coverage under COBRA or purchasing their own insurance policy. Here is the BIG question:

1. Are you insurable? If you are healthy, your best bet is to shop for your own plan. If not, individual insurance carriers may decline to offer your coverage, or increase your premium.

In group plans, the insurance carrier must accept all applicants, as long as they qualify as an employee or dependent, and enroll in a timely manner. This is not so on individual plans. The plans are individually underwritten with detailed health questions and a review of your medical records.