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Rising Costs of Medical Insurance

We are a small business. We have just received a renewal quote for a medical insurance from a major carrier. The costs went up 47%. Additional, the cost will vary by each participant (takes into consideration age and a number of dependents). Is this consistent with your business? How do you plan on addressing increased costs: passing them on to employees, reducing the benefit?

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

You don't say where you are, or if you went to the Exchange. A) Shop around. B) 47% is absurd, modify your plan. C) Share expense with employees.

Anonymous
(Partner) |

Sorry, Wayne. Here is more info:
Location - Metro DC area
Small business size: under 100 employees
Provider - CarefirstBlueCross
Plan - BlueChoice (a type of Open Access HMO)
Renewal rate: 47% increase in FY 2014 (vs. FY 2013)

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Did you shop?

Have you looked at a lesser plan, higher deductibles, etc?

And again, I'd look at off-loading some cost to employees (most have no clue what the cost of health insurance is, and that they actually earn $5-$20K more because the employer pays for health insurance.

Talk to different brokers (independent ones) and see if they find a deal, because at 100 lives you are no longer considered a small business (at least here in NY).

Good luck!

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

Find out what competitors are doing, i.e. check with your local trade group, and check local contacts. You can definitely off-load more costs to employees, but you risk high attrition. For example, if you raise co-pays for a Doctor visit or an Emergency Room visit, you may save money in the short-run. However, you may lose your employees to a competitor that offers a richer program. In this situation, it is best to follow the market. There is no benefit and it can be riskier to try and lead the market.

Sara Voight
Title: Controller
Company: Critical Signal Technologies, Inc
(Controller, Critical Signal Technologies, Inc) |

We saw a huge increase after our company hit a high enough employment number and we had two years of real life experience to count. When we shopped around, we were offered a chance to take a higher deductible and then wrap a lower deductible around it (I think they called it a Chelten wrap). The result was not a 43% increase, but only 17%. We ended up going a completely different way, but we were impressed that our broker suggested this option. When we looked at our plan history we found (no individual details, as that is illegal) several people with chronic conditions requiring a lot of medical visits and extremely expensive medicines. There isn't much we can do about the health of our current employees, but we did look seriously at how we shared costs and how we packaged our deal.

When we rolled out the new package we made a huge point of walking through all the costs so our employees understood how much out of pocket their employer was covering to provide them with healthcare that was affordable. Annual reviews come with salary and benefit details to continue to impress upon the employee how much their employer cares about them and their health.

Merh Brinkmann
Title: CFO
Company: Docebo NA Inc
(CFO, Docebo NA Inc) |

Here's the skinny, straight from our broker, because I asked the same question when I added new people on to our policy for 2014. I was shocked when I saw the new rates. An employee & spouse policy was coming back at $2000 for one month. That used to be the outrageous price on a family policy in NY. We are a GA-based biz with remote ee's in NY. In October we had policies that were costing $450/mo for single coverage of health/dental/grp life/vision (low deductible PPO). So, the $2000 price tag really shocked me. Here's what our broker said:

"This is related the Affordable Care Act mandates that were implemented in January. In October healthcare worked significantly different in terms of how groups were rates as opposed to now. At the time, everything I told you was accurate. Groups were underwritten based on medical history, group size, etc… That is what set your rates. As of January first all subscribers for all carriers are age-banded and rated on 3 factors(age, gender, and location). Your current employees have their rates protected through renewal, but new ee’s enrolled after 1/1/14 would have to be enrolled under the ACA regulations."

There it is.

Lynn Zeiner
Title: Business Manager
Company: DME Alliance, Inc
LinkedIn Profile
(Business Manager, DME Alliance, Inc) |

We, too, are a small firm - 20 employees - and our rates increased 60% from 2012 to 2013 and were on track to increase another 12% for 2014 - making our family coverage rates over $2000/month. We had a Capital Blue PPO plan - very good plan - but the costs were just not sustainable. Our employees were responsible for 25% of the premium at the time. We switched brokers because our current broker did nothing to try to find us alternative, less expensive options. Our new broker introduced us to High Deductible health plans with a Health Savings Account. Long story short...we were able to decrease plan costs AND fund employees health savings accounts to the point where their out of pocket was no more than it was with the original PPO plan. The high deductible plan can be "scary" to people who don't understand it or if they aren't receiving funds in their HSA to help buffer the increased out of pocket costs. However, if you can clearly explain the benefit and the fact that the unused HSA funds roll-over annually and are tax free and they belong to the employee once they are deposited, eventually the employee sees the benefit. We did a side-by-side cost comparison for the employees showing out of pocket costs to help explain as well as had our broker come in and do a presentation. We also were able to increase the employee's contribution to 33% to help offset the employer cost and they STILL were paying less out of pocket each month as opposed to the old PPO plan. So...

1. employer has decreased cost
2. employee has increased value due to benefits of HSA

Research your HDHP options and find a broker who really understands them and is an advocate for them. They will be your best asset.

One last thing....we stipulated that 2 things be completed in order to get the entire HSA contribution from the employer ($500 of the entire contribution amount):

1. proof of routine physical within last 12 months
2. completion of online health risk assessment via Capital Blue Cross (confidential)

This encourages the employee to be proactive with their health because who wants to miss out on $500? Plus the routine physical is covered 100% even with the high deductible insurance plan.

If you have more questions, feel free to message me on linkedin.

James Fisher
Title: Senior Broker - Pension and Benefits Spe..
Company: Select Insurance Group
(Senior Broker - Pension and Benefits Specialist, Select Insurance Group) |

First of all, cost shifting is not cost containment. Secondly, find a broker who can offer you a self funded plan. The availability of these plans varies by state according to the minimum number of employees but this is how you can find a way off of the treadmill of spiraling upward costs. Yes, leveraging HSA's and HRA's are both good tools to save on taxes but going to a self funded plan will save you on average $530 per employee per year. It is the difference between renting your benefits plans and owning them. When you self-fund, you get to retain the funds that were not spent on claims for future periods, unlike fully insured plans. With self funded plans, you mitigate risk using stop loss carriers who will provide coverage for both specific and aggregate limits. In many states, companies with as few as 5 employees can use these types of plans.

Kurt Kipfer
Title: CFO Emeritus
Company: International Medical Group, Inc.
(CFO Emeritus, International Medical Group, Inc.) |

I couldn't agree more, James!

Anonymous
(Director of Finance) |

Talk to an insurance broker (not an agent). Brokers can shop.

Stephen Salerno
Title: Director of Financial Planning and Analy..
Company: FINANCIAL CONSULTING
(Director of Financial Planning and Analysis, FINANCIAL CONSULTING) |

Another option is to look into the PEO model. A PEO that sponsors their own benefts plan can typically provides better pricing, long term cost containment with a more robust plan than small businesses usually get on their own. You also have HCR regulatory concerns taken off the table since PEO will isulate you from those and other liabilities.

There are other benefits as well, so if one does not have luck with the broker/agent route, you might want to see if the PEO model can provide an opttion to solve your issues.

Anonymous
(Partner) |

Thank you very much everyone, will let you know which option we decided on.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

Anon, Check out the other post regarding self funding that I have asked the group. A lot of great information related to Self Funding as we are seeing a 49% jump from 2013 to 2014; made us take a look outside the box for sure!

Sara Fluskey
Title: Communications Coordinator
Company: Nova Healthcare Administrators
(Communications Coordinator, Nova Healthcare Administrators) |

We have several examples of small companies showing savings with a self-funded plan. James is right on the money. It's certainly worth investigating. Especially if you find a TPA that is aggressive in their medical management program - an active program can go a long way in cutting costs and improving the health of your employees.

Andrea Luoni
Title: CEO
Company: RateCraft
LinkedIn Profile
(CEO, RateCraft) |

This is a common issue. Key is to find the right source the 80/20 rule applies within the insurance industry 80% of the agents are mediocre at best to bad, 20% are excellent. Most agents say they are consultants but they are not, broker/agent is used interchangeably. You might try to find a consultant that negotiates your insurance instead, they will bring real results to the table, such as HSA/HRA, self-funded, captives, fully insured plans that really deliver results, savings of 10%-35%. There are only a handful out there, so you will have to look hard. Consultants should work off contingency so you have nothing to lose and they serve as your advocate. They can navigate the good agent from the bad agents. You can keep your own agent and still reduce the cost. You can have them negotiate the health as well as the property casualty piece. We have a client this month that has a $500k savings, a two year rate lock, and a wellness plan that pays the employees up to $175 for utilizing the wellness program.

Nancy Ordway
Title: CFO
Company: Fulcrum Technologies, Inc.
(CFO, Fulcrum Technologies, Inc.) |

Another thing to consider is increase deductibles and maximum out of pocket expenses along with implementing a MERP (Medical Expense Reimbursement Program) where you reimburse employees for the increased out of pocket/deductible, or at least a portion of the increased expenses. This should get you a smaller premium increase.

Mark Matheny
Title: VP - FInancial Planning and Analysis
Company: Novolex (formerly Hilex Poly)
(VP - FInancial Planning and Analysis, Novolex (formerly Hilex Poly)) |

Like a lot of companies, we are taking a number of actions including increasing the employee's share of the cost but, more importantly, focusing on wellness and education. Lots of communication.

Laura Ouimet
Title: N/A
Company: N/A
(N/A, N/A) |

Quotes for a self-funded plan often appear attractive initially, because some insurers' quotes are based on only nine months of experience, spread across twelve payments. They know that the previous fixed-premium insurer will pay the "run-out". (These are claims that were incurred in one year, but not received and paid until the following year.) Because of this, quotes for the second year are usually much more than 33% higher than for the first year, when the quote now includes a full 12 months. Switching back from a self-funded plan to a fixed premium plan can also be expensive, due to the run-out. The employer will be responsible for paying the run-out at the same time that it is resuming fixed premium payments for the renewal year. Run-out insurance is available, but it is expensive, especially for plans of 100 lives or less.

Andrea Luoni
Title: CEO
Company: RateCraft
LinkedIn Profile
(CEO, RateCraft) |

Laura, I disagree - we have clients where the premiums are even better in the second year and forward, the max agg is lower and if you do get an increase in self funded it is on the stop loss. An example may be a company that fully insured is paying $800k, and on a self funded the stop loss cost is $135k. Fully insured gets a rate increase of 6%, self funded gets a 10% increase - which one is less? Self funded Self funded is not designed for a firm to get in and get out the next year, it is a long term solution. You do however, need the right agent/broker for it that knows how to negotiate the deal and help improve the plan each year. Perhaps your experience was with someone that did not have the experience, I find that many agents say they understand self funding but do not and then it is riskier for the client.

Dabney Wellford
Title: CFO
Company: Wellford Consulting
(CFO, Wellford Consulting) |

All,

You should look into the Colonial Life Medical Bridge to cover the difference in deductibles. It is low cost and covers hospitalization, outpatient surgery and diagnostic care on an indemnity-basis (not even caring what the health plan paid). It can be issued on a guaranteed-issue basis, waiving all pre-existing conditions.

I know of a number of companies in the Shenandoah Valley (VA) who are using it.

Anonymous
(Partner) |

I promised to let know what we ended up doing to manage rising healthcare costs. We worked with a broker who helped us find a a self-funded plan, keeping the costs at the same level.

Larry Bradley
Title: Consultant
Company: larrybradley.com
(Consultant, larrybradley.com) |

Elections matter. All the advice to "go to the exchanges" and "change your cover, share the burden" is pure BS. And people bragging that there increase was "only 17%?" The brainwashing built into Obamacare obviously is working; only a couple of years ago drastic reductions to coverage and drastic increases to premiums (17%) would have drawn outrage. Now we get screwed and the reaction is "thank you very much." and "oh well." What is wrong with you people?

Edward Thill
Title: VP - Finance & Operations
Company: Performance Trust
(VP - Finance & Operations, Performance Trust) |

The cost/benefit/employee-share dance has been going on for at least the last 15 years for me, through administrations from both sides of the aisle. I have ZERO love for Obamacare and big government but in years past, we gladly accepted "only 17%" increases when faced with the alternative of 30-50%+ increases. A Kaiser survey showed premiums increased 13% annually from 1999 to 2009. I didn't see the "outrage" you reference. The reality is that the system has been broken for much longer than these last few years and, sadly, remains so - perhaps more than ever.

Dabney Wellford
Title: CFO
Company: Wellford Consulting
(CFO, Wellford Consulting) |

Hopefully, everyone will wake up during this and the next election cycle. I am not trying to start a political conversation, but enough is enough. It will only get worse when the elections in the fall do not go his way.

Good post.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

In New York there is a new coalition which is heavily advertising on radio. It's about insurance fraud and what does to your premium.

They suggest you always check your bill. Good advice, but...

Most bills are unreadable to the above average person, forget about the average person.

This is the only industry where there is no requirement to post charges; and it is truly amazing that if for instance you go to the ER, you get an ER bill, a Radiologist bill, a this and that Dr or Service bill, sometimes with names or services you have no idea what they were about.

So, maybe we need to change the business of medicine and then the insurance of medicine and then the insurance industry....

William Williams
Title: Consultant
Company: Self
(Consultant, Self) |

Do you charge employees substantially more for unhealthy behaviors like smoking, overeating and not taking prescribed medications? If not, you should sit down with your broker and HR director and look at doing so.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Can you tell me how you know a person does not take, or doesn't take correctly prescribed medication?

And if we're going to penalize people for unhealthy behaviors, how about overdoing physical activity leading to increased injuries (both in the long and short term)?

And then there is of course pregnancy (which can have life threatening consequences for the expectant mother), living in a community with a lot of air, noise or other pollutants, areas where there are lots of trees and grasses exasperating allergies and asthma....

We should also penalize the insurance companies and doctors for poor service, lost time and productivity, legal bills for reading policies that are written to accept premiums and minimize payouts.

ArLyne Diamond
Title: Owner - President
Company: Diamond Associates
LinkedIn Profile
(Owner - President, Diamond Associates) |

welcome to socialized medicine

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