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Article No.:09-12

Article Title: Winning the Battle Against Rising Health Care Costs

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Author: Linda Gravett, Ph.D., SPHR, CEQCcash

Health insurance costs in our country have continued to escalate faster than the inflation rate this year.  From discussions with my clients across the country, I’ve learned that dealing with rising health insurance costs is the major concern of many businesses.  Their concern is well founded!  According to a recent Mercer survey, health care benefit costs will increase by 6.4% over this next year, or an average of $8,333 per employee, for companies of 500+ employees.

If employers want to continue to provide the benefit that employees value the most – health insurance coverage – they need to develop creative strategies to contain health care costs.  In this article, I’d like to share some ideas for accomplishing this challenge.

An option that is growing in popularity is that of consumer-driven health plans (CDHP’s).  CDHP’s are health benefit plans that let employees participate in selecting their own coverage options, choose health care providers, manage health care expenses, and take proactive steps to improve their health.

There are many CDHP options, although most include a high-deductible health plan combined with a Health Reimbursement Account (HRA) or Health Savings Account (HSA).  The high-deductible option protects employees against the financial effects of a severe illness or injury and the HRA and HSA options provide tax-free benefit dollars that employees can use to pay for routine medical costs such as doctor’s office visits.

CDHP’s provide an incentive to spend more carefully when purchasing health care services because unused contributions can be rolled over and used in future years.  This fact gives employees a partnership role in controlling their own health care costs.

Perhaps a CDHP is not the option for your organization right now.  If that’s the case, there are other options available to you to leverage your current plan to control health insurance costs.  Some of these options are described below:

  1. Cap your contributions when premiums rise.  If you’re currently paying $250 of a $300 employee premium, and the premium increases to $350, continue to pay the $250 and require employees to be responsible for the balance. 

  2. Shift expenses by changing the deductible or co-insurance amount.  If you have an 80/20 co-insurance plan with a $250 deductible and a $1,000 cap on employee out-of-pocket payments, offset rising costs by shifting to a 70/30 co-insurance plan or raising the deductible.

  3. Change your prescription options.  Consider adding a $250 or $500 deductible to your prescription drug benefit, or implement a tiered plan in which employees pay a higher amount for newer brand prescriptions than for generic drugs.

  4. Adjust family coverage.  Essentially, most plans require single employees or those without children to subsidize coverage for employees with families.  Consider adjusting your company contributions to your employees’ family coverage by requiring employees to pay at least some portion of their premiums for family member coverage.

While there is no one strategy that fits all companies, this is definitely a good time to take proactive steps to offset the rising cost of health care coverage.  My last recommendation is to get you employees engaged in this process – solicit their ideas and encourage their participation in wellness efforts.  This will all help to control health care costs.

If you have questions about this article, don’t hesitate to contact Dr. Gravett at lsg@justthebasics.com.  Or, use our contact form by clicking here.

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