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Providing health care benefits
is the single, largest employee-related expense for employers.
Since 2000 the cost of health care benefits has increased
40 to 50 per cent.
For human resources representatives
and CFO's, the burden of making the best decision in allocating
these great sums only gets tougher-given the fast changing
and increasingly complicated reality of health care coverage
in the U.S.
The following Q & A, was
compiled by Michael McKenna, president of Massachusetts-based
Partners Benefit Group (www.partnersbenefitgroup.com), a full
service employee benefits management company. Mr. McKenna
has helped numerous companies beat the trend of skyrocketing
health care benefits costs through the development of non-traditional
plans. His Q&A offers employee benefits purchasers an
at-a-glance resource for making smart, informed decisions.
Q. Is there any way we can
save money on our healthcare benefits coverage costs?
A. Healthcare benefit plans are moving from traditional "managed
care" (i.e., HMO's or other doctor-hospital network that
acts as an intermediate between the person seeking care and
the physician) to "consumer driven and other high deductible
plans"-plans that require out of pocket payments by the
insured before the insurer covers any claimed expenses.
The dilemma for employers is
that most plans with affordable premiums now come with a high
deductible for the employee, usually between $500 - $3,000
per year. The solution is to utilize the services of a broker
who is also an experienced secondary payer, or familiar with
the secondary payer market; is familiar with these plans;
and can assess risk-which can enable the employer and the
employee to creatively strategize with these deductible options
thus reducing the impact of these deductibles.
These strategies offer employers
the flexibility to creatively apply some of the savings they
earn by choosing high deductible plans, reduce their insurance
premium and use some of the savings to help the employee offset
some of their annual deductible expense. For instance, a very
simple plan might be to purchase a deductible of $1000 per
year, the employer may have savings enough to cover the second
$500 of the deductible and ask the employee to pay the first
$500 of this deductible.
Q. What's a secondary payer?
A. Secondary payers (or 3rd party administrators) for this
discussion are entities that ensure the accurate and timely
payment for all or a portion of a deductible on the healthcare
plan directly to the medical or dental provider who is owed
this money, service all employee and medical provider inquiries
and provide meaningful claims reporting to the employer.
Here's how it works: an employer
selects an employee benefits management company, usually a
sophisticated insurance agency, from whom they purchase their
healthcare coverage plan. With the savings from the high deductible
plan they purchase-they create a funding account that the
employee benefits management company uses to administer payment
of their employees' deductible, when employees file claims
under their healthcare coverage.
Q. How much can these high
deductible plans save us?
A. Savings, including the cost of the reimbursed claims, can
range from 8% to 35%. It depends on what is currently being
offered. Is the employer moving from an HMO to a deductible
plan?
In some cases the strategy
described here, admittedly, doesn't result in savings. But
there are other definitions of "cost savings"-in
these instances the option may be to use as leverage to negotiate
administrative costs down, provide better data for the employer
or even just improve the overall administration of the plan
based on better technology and more service oriented procedures.
Q. Do high deductible/secondary
payer plans mean more work for the employer providing the
healthcare benefits coverage?
A. It's true that if employers want to drive down the cost
of healthcare benefits coverage they have to work at it. But
by engaging a benefits management company that acts as a secondary
payer and allowing employees to interact with them, most of
the healthcare benefits administration work is passed on to
the management company. They will take care of processing
claims, making payments to the medical care providers, handling
late notices, administrating COBRA and serving as a resource
on compliance.
Primarily the employers' role
will be limited to holding enrollment meetings and funding
the reimbursement account.
Q. Why doesn't my current
broker provide these services?
A. Traditionally employers have purchased healthcare benefits
from insurance generalists who essentially provided transactional
service. With the vastly increased costs of healthcare benefits,
the ongoing legislative changes and the sheer complexity of
the products, the industry is moving from generalists to specialists/strategists.
Working with an informed, strategic
healthcare benefits specialist is now virtually a requirement
to achieve significant cost containment. A specialist goes
beyond the role of the traditional insurance broker and transactional
administrator. They create, develop and price out strategic
plans based on a thorough understanding of risk and also have
the ability to administer creative and attractive options
working with high deductible healthcare coverage plans. For
more information or to reach Michael McKenna, please call,
toll-free, 877.993.5600 or e-mail him at mike@partnersbenefitgroup.com
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