With the end of daylight-saving time and the beginning of the holiday season comes another annual ritual—open enrollment and next year’s health insurance premium notice.
The 2008 quotes may break the bank, especially for smaller companies and those in states whose insurance regulators allow demographic rating—a technique that sets the rates based on the age and sex of employees.
That doesn’t mean, however, that you should immediately look at your work force and fire older employees or refuse to hire older applicants. The savings you net on health care costs may be dwarfed by the expense of defending the age discrimination lawsuit that will inevitably follow.
But there are steps employers can take to stem the health care cost hemorrhaging and keep out of court.
First, some background data: According to a recently released study by the Kaiser Family Foundation, a health care research organization, employers reported they paid an average of 6.1% more in 2007 for health insurance than they did the previous year. And 2008 won’t be any better, given that the most recent Mercer Health & Benefits Survey of 1,557 employer plans shows that premiums will rise an average of 9%.
Tip # 1: Ask employees to pay more
There’s some good news, though. Mercer also reports that employers that shift to higher premiums, deductibles, co-pays or out-of-pocket maximums will be able to keep the 2008 increase to about 6.7%. So take a close look at the options your insurance carrier presents. Switching to a high-deductible health plan can save thousands per year, as can simply raising the co-pay that employees pay per visit.
Be prepared for employee reluctance. It may help to share the raw numbers. Many employees have no idea exactly how much health insurance coverage costs. For example, the Kaiser survey found that the average cost for family coverage was $12,106 in 2007.
Tip # 2: Consider HSAs
Explain the benefits of a high-deductible policy coupled with a Health Savings Account. HSAs allow employees to set aside money for medical bills tax-free. They can use the money to meet yearly deductibles. Any money left over can stay in the plan for future health care costs and grows tax-free. Healthy employees who don’t use much health care may find this option very appealing.
Tip # 3: Don’t over-insure
Offer a financial incentive for employees to drop extra coverage. Employees who have a spouse working elsewhere may be eligible for coverage under that plan, or may actually be covered by both. If you offer an annual bonus in exchange for dropping family coverage, your costs may drop dramatically.
In addition, conduct an eligibility audit. Some employees’ “dependents” may no longer be eligible for coverage. For example, a college-age child may not be taking enough credits to be eligible as a full-time student. Let employees know you will be doing the audit and give them an opportunity to correct the mistake first. You’d be surprised how many will cooperate.
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