In today’s environment, most employers are dealing with health insurance coverage issues – costs incurred by their company and costs borne by employees. At annual renewal of the health insurance coverage policy, some employers are faced with dramatic increases in premiums. While not optimal, below are three ways that you can prevent this premium increase from negatively impacting the profits of the business.
- Impose the premium increase on the employees. We recommend that any employer subsidy of employee health premiums, be expressed as a fixed dollar amount rather than as a percentage of the billed premium. Thus, if the premium increases from $350 to $850 per month, the employer is not automatically obligated to pay 50 percent of the increase if that was the premium share previously subsidized. State your premium support as a monthly amount such as $300 per month, so that all the increase falls to the employee. You may decide to increase your help but will not be obligated to do so.
- Reduce the coverage benefits and in some cases dramatically. This reduction in coverage takes the form of increasing the co-payments required at the time of service, requiring the insured to satisfy a larger annual deductible before benefits are paid, and eliminating from coverage certain procedures. These changes create for the employee an amount due out of their pocket which is much greater than their prior year health cost. This increased burden is the “gap” generated by employer dictated plan design.
- If you’ve done number two above, offer employees an option to buy “gap coverage.” To address this “gap” in coverage, there are insurance products available at relatively modest premiums (estimated between $35 and $90). For example, if an employer modified their coverage to require each employee to pay an incremental $5,000 of health costs each year, the premiums on that policy would drop dramatically. These are amounts which can more easily be handled by the employees than the $5,000 “gap.” In the case of one client who put this technique into place, the employer saved nearly $100,000 on coverage for 100 employees.
It’s important to think through all options when renewing your health insurance coverage policy. These options are worth considering.