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Can the company ‘profit’ from the share of health premiums charged to employees?

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in Employee Benefits Program,Human Resources

Q. We are a self-insured company, and pay 100% of the premiums for employee-only health insurance coverage. (Employees with spouses and families are responsible for those premiums.) After several large claims last year, our president decided to increase the premiums deducted from employees’ paychecks. However, the rate he has directed to be deducted is higher than the rate at which we are billed for the spouse and dependent coverage. Is it legal to make money off of the “premiums” we ask em­­ployees to pay?

A. Employers are generally free to decide how much of the costs of health insurance coverage to pass through to employees. Generally, the process for establishing premiums for self-funded health benefits starts with the employer getting a handle on three major ­variables:

  1. Expected costs of the benefits themselves
  2. Extent to which those benefits costs are covered by a stop-loss carrier
  3. Expected costs of plan administrati...(register to read more)

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{ 1 comment… read it below or add one }

Joshua LaLanne August 29, 2013 at 6:48 pm

I apologize if I misunderstood, but I feel like the answer didn’t really address the original question; I believe there was some clarification needed on what “self-funded” entailed.

I am an employee for a privately held company that collects premiums from employees, and pays all claims from that pool of money. They pay a national insurance company a nominal fee to administrate the plan, which also provides the employees with their network of doctors and associated discounts. There are two plans to choose from: a standard PPO, and a cheaper CDHP, which pays no claims until a fairly high deductible has been met.

Last year, stating that claims on the PPO plan had increased, my employer drastically increased the premiums (40%) for the PPO plan, effectively forcing all but the most desperate to change enrollment to the CDHP.
I’ve found out that while there were increased claims that year, they did not exceed the premiums taken in. Since the CDHP rarely pays out any claim, and the administration fee paid to the national provider is about 10% of the premium, it’s become apparent that my employer is now acting as a for-profit insurance company, and we employees are the customers, and are viewed as a revenue stream.

It seems to me that there is a serious conflict of interest. Employees here can’t afford private insurance, so we’re essentially forced to choose between paying an insanely high premium for standard insurance, or paying a standard premium for almost no coverage, all in the name of increased company profits.

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