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What are the pitfalls of raising employee contributions to health insurance?

by on
in The HR Specialist Forum

Question: “We’re working with our insurance broker to figure out how we can continue to offer good benefits without raising our costs. She suggested increasing the amount employees contribute for health insurance. I’m sure we’ll face resistance, but it looks like that may be our only option. Who else has faced this dilemma? How much did you hike employee contributions? How did you sell it to employees? Are there other options to consider?”—Jim, SoCal


Every year our broker looks at competitive bids or we alter plan benefits to try to keep our premiums low. Five years ago we set up a percentage based plan so an employee only pays 20% of the premium and an employee with dependent or family coverage pays 25%. So if there is a premium increase the employee's contribution is adjusted accordingly.

Jim, I ran into this dilema last year. Our increase was 17% if we stayed with the same provisions: $15 copay for office visits, no deductible, etc. With some research of my own on the Health providers website (my benefits consultant was useless) I found a plan exactly the same, but with only small changes (co pay from $15 - $25 and a one-time hospitaliation deductible of $300, we reduced the increase from 17% to 8% and we didn't have to change the contribution amount for the employees. Have your benefits consultant research other options by changing co-pays or deductible amounts. This was easier for the employees to swallow than the bigger hike in premiums. By the way...we pay 80% and the EE contributes 20%.

We went through the same situation last year and here is what we were able to do. The company pays 100% of employee premium which is a higher deductible,copay, etc. The employees have the option to buy up which is a lower deductible,copay and so forth. If the employee chooses to not go with the buy up they have no one to blame but themselves. If they only take what the company offers at least they have some coverage. For about 3 years now we have had the higher deductible, it was nice to be offered the buy up option.

We implemented a Health Reimbursement Plan to keep our cost down. In fact, in lowered our employee contributions. We opted for a $1,000 deductible and co-insurance; thus assuming the risk instead of the insurance company. We reimburse this amount for all covered dependents. We use a TPA to administer the reimbursments to the employees and their dependents. It does involve some work on the employees part to make this plan work. However, our savings were tremendous.

In 2007 we switched to a semi-self insured plan and reduced our premiums drasticly. Would you believe it was 40% lower than what it would have been if we had stayed with our previous coverage? Our employees paid a token $50 per month for themselves and we reduced that to $25. They pay 1/2 if family is included so they shared in the savings. We increased the deductible and reimburse the employee for the difference between the old and new deductible. That turned out to be a very small amount for the year. When we renewed this year our total increase was 4%. Sometimes you have to think outside the box.

What strategies do you use to get individuals to attend meetings they have commited to participate in, as well as get everyone there on time so people are not waiting 15 to 30 minutes waiting for everyone to arrive?

We have three different health plans we offer our employees- A PPO low deductible, PPO high deductible and a HMO.. They choose the plan, then choose single coverage, parent-child, or family coverage. The company pays 80% of the premium and the employee pays 20%. Our employees are happy with this.

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