It’s the time of the year when many employers renew their group medical plans. Before signing your renewal, why not look outside the box for creative solutions. As insurance premiums have continued to rise, it is as important as ever to consider all your options.
Industry Pooled Plans
No, we’re not talking swimming pools! These are partially self-funded industry specific health insurance pools. This allows for businesses within a particular industry to “pool” together with the hopes of obtaining affordable premiums and even more importantly, rate STABILITY. So far, these pools have been successful in maintaining lower renewals. To do this, these pools medically underwrite each group to ensure that each group has an accurate rate. This is either done by having each employee complete a confidential health questionnaire, or for larger groups, the benefit administrator will complete a questionnaire to the best of his/her knowledge. These pools typically have 10 to 20 rate bands to ensure each group is given an appropriate rate. Also, by being partially self-funded, they are able to save some insurer taxes. There are pools for: Contractors, Non-Profits, Professionals (Physicians / Accountants), High Tech and more.
Health Reimbursement Accounts
Sometimes, a little risk can lead to large rewards. There is an 80/20 rule in health insurance that is largely true: 80 percent of the costs are attributed to 20 percent of the insureds. This is largely how the insurance business can stay solvent. Everyone has a bad year every now and then. One way an employer can attempt to provide the greatest benefit for everyone is to establish a Health Reimbursement Account (HRA). Unlike Health Savings Accounts, HRAs are owned by the employer. The employer establishes a higher deductible plan (hopefully providing some monthly savings) and sets aside a defined amount per employee per year. For example, an employer may increase the company health insurance deductible from $1,000 to $4,000; thus, creating a savings of 10 percent. To help offset the additional deductible exposure to the employees, the employer may set aside $2,000 per employee per year assistance through an HRA. A logical way to design this would be to make HRA funds available AFTER the employee has first met a significant portion of his or her deductible. Then, the employer is on the hook for the second part up to the $4,000 deductible. Since each year only a small percentage of employees typically reach the deductible threshold, there is a chance that the annual savings in premium will be higher than the annual outlay through the HRA. There is always the chance, however, that more people than expected reach this threshold and the employer would be required to outlay more than expected. There are lots of creative ways to set up HRAs and it should be carefully designed to meet the needs of the employees without over exposing the employer.
A knowledgeable, professional insurance broker can be very helpful in finding creative solutions to help manage your employee benefit costs. FBN
By Ed Gussio, Benefit Logic in Flagstaff.
