When it comes to health care, the first thing you need to remember is you have options. Your business can have numerous unique and customizable variables: union/non-union, employees/independent contractors, salespeople, office help, field personnel, managers, etc. The combinations are endless. Plus, this doesn't encompass your personal philosophy on how you want them protected, or the type of value you place on providing those benefits (read: budgets).
You need to understand that you can affect the premiums you are paying. And by understanding what goes into your premium, you can work toward lower premiums and still maintain good protection for your employees.
What seems to get forgotten in the Employee Benefits field is that all insurance - health insurance included - is a transfer of risk. The person who is purchasing the insurance policy is transferring risk to the insurance company for costs they either do not want to or cannot afford. They pay a premium and the insurance company takes on the risk at some point.
The first dollars, called deductibles, are usually 100% of the insured's money. The next level of coverage is what is called co-insurance which, as the name implies, is a portion that is shared between the insurance company and the insured. This is the portion described as 80/20 or 70/30 on your policy up to a certain dollar amount such as $10,000 or $15,000.
What this means to you is that the insurance company is responsible for 80% of the bills, and the insured is responsible for 20% of the bills. For every thousand up to $10,000, the company pays $800 and you pay $200 until you get over the prescribed dollar amount; in this example, it would be the $10,000 or $15,000. The final level is where the insured's total risk is transferred to the insurance company, which is responsible for 100% of the bills at this point.
Now, you may have noticed that I didn't say anything about co-pays of $25 or $35 when you go to the doctor or that apply to prescriptions. There is a reason for this. Those are bells and whistles that the insurance company provides and on which they make a profit. Typically, these bells and whistles add $100 each to the premiums. That's an additional $1,200/year for doctor visits and $1,200/year for prescription coverage before you ever get into the insurance companies' pockets. Plus, you still pay the co-pays as you use the services.
Health insurance is the only insurance that provides for maintenance to be covered. Does your auto insurance cover you for oil changes, car washes, new tires or brake jobs? Of course not. How about your homeowner's insurance? Does it cover you for mowing the lawn, painting the house or sealing the driveway?
The reason that I bring this up is because these bells and whistles have become expected by employees, yet they are not aware how much they actually cost. If they were aware, I believe that more times than not, they would forego them.
Let's take a look at the stats. The average family spends around $1,200/year on healthcare. The average family has a hospitalization once every 8 to 9 years. Only 6% to 10% of policies max out their deductibles and co-insurance in any given year. Take a look at your own situation and ask yourself if you fall within these averages or, better yet, see if your employees fall within these averages. If so, you have options.
With the unemployment rate and rising cost of healthcare that all over the news, your employees are aware of how bad things could be. Given the chance, they would probably like to take a proactive role in controlling their healthcare costs. Your first job is to find a creative, forward-thinking insurance broker that will take a long-term view and help customize a plan for you. If your broker has just been asking for a census and bringing back rate increases, you need to search for a new broker, even if your current one is your brother-in-law. Remember, you have options.
