Posted: 08.01.2008
The tough economic outlook in Southeast Michigan combined with healthcare cost increases have left many employers looking for solutions to control employee benefits spending.
Following are a few strategies to consider as you look toward your next open enrollment period.
Assume Some of the Risk – Employers with 100 or more employees often save by self funding portions of their employee benefits costs, and this continues to be a wise alternative to consider for larger groups. However, there are also ways by which smaller employers can assume a portion of their health plan’s risk and potentially save significant dollars.
Self funding of prescription drugs is typically worth exploring in groups of 50 or more employees, although groups as small as 25 employees often can find savings as well. Because administrative loads are greatly reduced and insurance company profit margins are eliminated, employers might expect to save 15–40% on prescription drug insurance costs. There is however a risk that self funded costs could come in higher than related insurance premiums if claims activity is high, so employers are wise to analyze the prescription utilization of their workforce prior to embarking on a self funded prescription plan.
Another popular risk-taking venture is a Health Reimbursement Arrangement (HRA). The idea is for an employer to buy a health insurance plan with a high deductible (usually $1,000 to $2,500) and then reimburse employees all or a portion of the deductible.
Premium savings for an HRA usually outweigh the reimbursements. For a healthy group employers can typically save about 10%. However, there is a risk. An employer could incur higher costs if too many employees incur the deductible. To help offset this risk some insurance companies sell policies to cover the reimbursement, however the premiums will eat into the savings. Again, careful risk analysis prior to implementation is necessary.
Control Access to Your Plan – Employers who do not vigilantly monitor plan eligibility can end up paying a benefits burden that should belong to another employer’s health plan or paying premiums for dependants who are not actually eligible for coverage.
One way to be sure that your company is not bearing the benefits costs of another employer is to implement a Working Spouse Provision into your premium contribution schedule. Working Spouse Provisions restrict coverage for spouses who have access to their own employer’s health plan by adding additional premium penalties to any spouse who has coverage available elsewhere but does not take it.
Another way to control access to your plan is to require documentation in order to enroll a dependant for coverage. For example, in order for a spouse to be enrolled a copy of a marriage certificate must be provided, or in the case of a dependant child, a birth certificate. An audit of current plan participants will normally uncover 10-15% of dependants who are ineligible for coverage, so savings can be significant. There are specialized companies who will conduct such an audit for a charge, and this is a good option for larger employers, however small employers who have direct daily contact with their employees may choose to handle the audit internally.
Whether you’re working proactively to lower costs or hunkering down in full-blown survival mode, consider tweaking your plans to wring out all available savings. Contact an ALCOS employee benefits specialist for more details of how we can help.
