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Look at Non-Traditional Ways
to Reduce Health Care Costs

No doubt you've considered the typical options suggested by the health insurance industry:  

• Shop for a different carrier
• Slowly creep deductibles upward -- $250 to $500, $500 to $1000, etc.
• Slowly creep copays upward -- office visits, drug cards, etc.  
• Continue to shift premiums to employees

Those will work for awhile.  You may wish to consider some ideas that they may not suggest: 

• Health Savings Accounts -- This approach moves the employee from being a dependent of the health care system to becoming a consumer of health care services.  High deductible insurance slashes premium costs.  The difference goes into a pre-tax, portable savings account (like a health care IRA) that the employee gets to keep if he shrewdly manages his own health care costs.  Be creative about the inception of such a plan:
  • In year 1, divert your savings directly to employee savings deposits.  Consider a "front-end" deposit -- perhaps 6 months -- up front as a "cushion" for the employee's immediate out-of-pocket costs.  One CEBI member did this, and saved $35,000 in the first year of the plan.  
  • Educate, educate, educate.  Professional employees will "get it" more quickly, like they do qualified savings plans in general.
  • Promote employee contributions to their HSA savings accounts -- they can put money away, also.  It's pre-tax, just like a 401(k) or IRA, and it's tax free for life, as long as it's spent on anything health-care related, including things not covered by insurance at all. 
  • An excellent overview of HSAs is available in the CEBI Summit Library:  http://www.chiefexecutiveboards.com/membersonly/SummitFiles/HSA.ppt  
    
• Encourage employees to "opt out" of your health care plan.  Many companies have unwittingly attracted health care costs by allowing employees to optimize their coverage choices.  You may be insuring spouses and dependents who are otherwise eligible to be on another plan.  Consider these strategies:  
  • Offer employees a cash incentive to "opt out" of your plan.  They can do this in several ways:
    • Move their coverage to a spouse's plan
    • Choose private insurance coverage -- these plans are becoming more readily available, particularly for employees without major pre-existing conditions.  They are regulated, in that policy holders generally cannot be cancelled nor "rated up" based on individual claims experience.  Employees who look may be amazed at the savings available via HSA-based private coverage.
  • Typical cash incentives range from $100 to 200 per month, or 50% of single premium cost.  Remember, the employee can make this incentive pre-tax by diverting it into his HSA.  
  • Do be sure and require proof that the employee has health care coverage elsewhere before paying incentives.  You don't want an employee "going bare" and then absent when he has a health care problem.
  • Many plans have floors on participant percentage, so this strategy has some limitations.  Consult the terms of your plan.
    
• Require that employees insure spouses elsewhere if eligible.  You don't have an obligation to insure the world.  
  
• Drop health care benefits altogether and pay an insurance "allowance".  Again, employees can, if they will, find coverage elsewhere.  Again, you can deposit the allowance directly to their HSAs pre-tax, or suggest that they do the same.  
  
• Drop dental insurance -- it's the worst group insurance deal going.  Most employees never recover the cost of dental insurance in actual benefits, considering that almost all dentists offer "self-pay discounts" and that the really expensive things (crowns, etc.) have coverage limits far below the cost of the service. Using HSA money for dental care is a far better option.  

As always, your situation is unique -- be sure and consult your trusted insurance and legal advisors to be sure your chosen strategy is in your best interest.