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HEALTH INSURANCE

Health Insurance Premiums do not generate income for your business. They are 100% pure profit dollars out of your pocket.

Look, Health Premiums are going up, they have been going up, and they will continue to go up. So what do you do? Well, there are some solutions other than increasing deductibles, co insurance and co pays.

1. Shop your insurance - For some strange reason Insurance Carriers give their best rates to NEW customers (I know, as a business owner, this makes no sense - it doesn't to me either). And Insurance Companies change their rating structures all the time; so if you looked at one carrier (or several) last year and they were not competitive, they may be very competitive this year. Yes, it is a pain, and your agent does not want to do it but it is money out of your pocket if you don't.

2. Negotiate your rates at renewal - That is right, when you get those renewal rates on your medical plan each year, they are not written in stone; you can negotiate them. And that is part of your agent's job. Although to be honest most agents don't. If your current carrier will not negotiate and you feel the rate increase is unjustified: maybe your claims versus premium ratio is good, or there have been changes in your groups over all medical situation, then you should shop your insurance.

3. Add more benefits - This is another one that makes no sense, but often works. Medical carriers love to add different lines of business to existing groups (life, dental, vision, disability).They will often give you discounts on your medical premium if you will add one or more lines. Many times the discounts will offset the cost of adding these new benefits. So you may end up with the same premium increase but your employees have additional benefits and there is no or little additional cost to you.

4. Health Savings Accounts - This is a policy with a high deductible that usually pays 100% after the deductible is met (although it can be set up with some coinsurance as well). The employees set up a Health Savings Account that allows them to deposit money into an account, on a pre-tax basis, for their health costs. Usually these plans do not have a doctor co pay or drug card co pay; all of these costs are subject to deductible. Any money in the account at the end of the year will roll over and be available the next year. Both the employer and the employees can contribute to the account, but once the employer has contributed to the employee's account, it is the employees to take with them if they leave the company.

5. Health Reimbursement Arrangement - Unlike the Health Savings Account (HSA) which provide high deductible plans with limited exposure (high first dollar costs to the employee); the Health Reimbursement Arrangement (HRA) is usually designed to provide less first dollar costs to the employee while limiting the exposure to the employer. These plans can be designed in a variety of ways to give the employees the benefits they desire (limited expense to the employee for doctor visits or prescription drugs) while still keeping medical premiums down for the employer. Only the employer can contribute to the HRA but the money does not have to actually be contributed until needed by the employee. The money in the employee's account stays with the company if the employee leaves. Premiums are kept low because the actual insurance policy is designed with a higher deductible and no doctor or drug card co pays. The employer in the HRA document decides which benefits they will pay for and how much they will contribute. The basic idea is the premium savings will more than offset the employer's contributions. These plans used to be some what cumbersome due to the need for a Third Party Administrator (TPA) to administer the HRA; however there are now insurance carriers that will do the administration for their HRA. The HRA is an excellent way to keep costs down, both immediately and in the long term.

6. Self-funding - With a fully insured plan, the employer makes a decision as to what the benefits are going to be in their medical plan. The insurance carrier takes on all the risk for paid claims. The richer the benefits, the more risk the carrier takes on, and so the higher the premium. With a self-funded plan the employer lays off part of the risk on the insurance carrier and keeps part of the risk themselves. The advantages with this plan are: the employer receives a lower premium due to the insurance carrier taking on less risk, the cash savings during years with low paid claims, and the knowledge of what their maximum claims cost will be during the years with high paid claims. It is important to know that each year the employer has a maximum amount they can be charged for claims, both per employee and for the company as a whole. Self-funding is much like and expanded HRA and is also an excellent way to keep costs down. However, should usually only be used for companies with 50 or more employees.

7. Texas Small Employer Coalition or HB 897 - I am listing this because so many employers are asking about it. In reality it hardly ever works to the advantage of all the employers involved. The way it works is: any number of employers with companies of less than 50 employees can band together to form a coalition as long as the total number of the employees in all the companies does not equal 50 or more. (E.g. 7 companies with 7 employees each can band together to form a coalition.) The idea is with the greater size the coalition gets a price break from the insurance carrier and some leeway on rate ups for medical conditions. In reality, unless all companies involved are relatively healthy, the companies with healthy employees will end up picking up the slack for the companies with not so healthy employees. This is usually done with companies that have not had group medical insurance in the past and think they are getting a deal.
 
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