More Strategies for Health Care Costs

The article, “ How to Tame Health Care Costs ” ( JofA , Aug.03, page 83), suggests the option of eliminating health care benefits completely. We all know that is an obvious choice and probably not worth much discussion.

However, there are some additional health care cost-management strategies the article did not discuss that I have found useful.

Health care underwriters are marketing new cost-sharing plans that basically include an in-network deductible as a cost-share element. The result is both a lower benefit and a lower premium.

More commonly, it is appropriate and cost-effective for employers to put tiered plans in place. For example, a company could implement a high and a low plan and let employees choose. Naturally, the higher-benefit tier would require employees to share a greater proportion of the cost through payroll deductions. For many companies a low plan might include HMO (medical) and DMO (dental) options, while a high plan would include PPO or open-access plans. This makes insurance more affordable for lower-paid employees who today may not be insured at all, while leaving more robust plans available for executives and others who desire to pay more for them.

There are some useful negotiating strategies your broker or underwriter may not want you to be aware of:

First, you have to get quotes from more than one carrier. Health underwriters will lower premium quotes if they know they can get a new group or stand to lose a group to a competitor. I recently saw one carrier drop rates by 5% and the competitor knock off 3%.

Second, health underwriters typically notify brokers when there is a second broker competing for the business, especially in larger entities (more than 50 employees). This may have your brokers questioning your loyalty, but it also puts them on their toes. Each broker has a different creative approach for fitting a plan to your company. You will gain some great ideas by shopping around even if you ultimately remain with your old broker. Also, brokers have different commission rates for particular carriers. They can reduce their commissions, pass the savings along to you and still make a profit. This can translate into another percentage point or two in cost reductions.

My emphasis lately is to raise some of the incidental out-of-pocket copayments and deductibles, increase cost sharing with staff, provide tiered options and remain focused on the value of insurance as catastrophic coverage, while negotiating quote reductions to deliver well-balanced value to the employer, employee and shareholders.

Ernest J. Scheidemann, CPA
Wayne, New Jersey