Medical insurance rates are rising everywhere. Businesses are scrambling to contain and cut costs. Employers are pressed to offer a variety of benefits to be competitive in the market and health insurance usually ranks high on that list of employee benefits. All size businesses, from the self-employed to the largest establishments are eager to save premium dollars.
Prescription drug coverage is the most obvious culprit of premium increases. Firmly embedded in most benefit programs, this benefit is accounting for double digit rate increases that managed care was supposed to eliminate. Drug utilization goes up as age goes up; as clinical trail efficacy rates in curing disease go up; as its role in reducing inpatient utilization goes up; and, in a new twist, as pharmaceuticals advertise directly to consumers, empowering them to tell their physicians what drugs they wish to take. All this leaves you weighing drug programs and their costs, putting higher deductibles on them.
Over the last few years, a large population of subscribers moved into PPO (Preferred Provider Organization) plans. There are options under PPO plans to lower premiums by increasing deductibles and co-pays. Exercising them seems to be more popular than opting for reduced provider selection at reduced HMO premiums. Of course, particularly for larger companies, there is also the increasingly popular point of service (POS) product, with intermediate premiums, which lets subscribers choose in-or out-of-network providers, with co-pay/coinsurance consequences.
Another cause of climbing rate increases is that managed care may have reached its limits in reducing costs. Managed care kept things in check for most of the 1990's but costs are beginning to rise again. With the inception of managed care, health care providers were pleased with the steady flow of patients and regular payments. At the same time, employers were able to provide competitive health plans to their employees at affordable premiums. Nowadays, those same health care providers are bargaining more fiercely for higher reimbursement rates from insurance carriers and these costs are passed to consumers. Yet another premium increase factor is legislatively mandated benefits. While these mandates are generating some improvements, they have increased costs for all insureds. Rising costs also forces employers to consider premium cost sharing options with their employees.
Most employees truly do not appreciate the cost of health benefits. They have never needed to until recently. Today, however, they expect more than ever to share the burden rather than sacrifice core benefits. Group medical insurance plans, the bedrock of any employee benefits plan, may still be sacred. Beyond it, though, there is room for cooperative dialogue. Vision, dental, life and disability coverage can all go perhaps, if there's an alternative strategy.
Enter voluntary benefits, a package of ancillary benefits offered as an employer-sponsored cafeteria program where the employee picks and pays for what fits his/her lifestyle today, and takes it with him tomorrow. Totally portable, these benefits: universal and term life, accident insurance, long and short-term disability, supplemental health insurance (hospital income benefit), special risk insurance (individual critical illness) are rate-guaranteed, at purchase age, for the duration.
Careful consideration should also be given to implementing a Medical Savings Account (MSA). MSAs are a revolutionary new health care product. They promise to reduce health care costs as much as managed care plans but provide as much freedom of choice to patients as traditional "fee for service" plans. MSAs promote savings and may be used to supplement income in retirement or in case of disability. They represent a move away from insurance company medical decision-making and toward patient-physician decision-making. Certain criteria must be met in order to be eligible for a MSA. To qualify, you must be:
- An employee of a small company (50 or fewer) or self-employed.
- Covered by a high deductible health plan (HDHP), with a deductible of at least $1,500 for singles and a deductible of at least $3,000 for families.
Don't confuse MSAs with FSAs (Flexible Spending Accounts). FSAs have a "use it or lose it" provision whereas MSAs carry over from year to year and are able to be withdrawn at retirement. Either the employee or the employer can contribute to MSAs, while FSAs are employee contributed only. FSAs contributions can be as high as the employer's plan allows. MSA contributions are limited based on the deductible of the adjoined health plan. FSAs can exist with any health plan. MSAs can only exist in conjunction with a high deductible health plan.
Few employers are likely to abandon their employees when it comes to health benefits. However, with costs expected to rise significantly, it is not uncommon to ask employees to pitch in. Employers should discuss their employee's needs and their level of satisfaction with their current health plan. While providing a high-end health plan is generous, some benefits offered may be unnecessary and financially burdensome for the employer.
Most projections suggest that health insurance costs will continue to rise. Select an insurance broker that specializes in employee benefits to provide you with choices that may fit you and your business needs. Working with an employee benefits specialist who can help you choose, as well as manage and administer your company's benefits, is important and will help you get the most from your health plan. You should also seek competent tax advice when designing your employee benefits program.
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