Seven Ways to Contain Business Health-Care Costs

The following is an article from Wall Street Journal Small Business.  In it, the author makes some very good points.  As much as we are all looking for a fix for Health Care costs, the fix will be at best 2 full renewal cycles away for most employer groups.  If a languishing business climate requires you to take action now, here are a few things for you to consider:


Health care reform is a long way off.

Even if Congress comes to a consensus on the issue in time for President Barack Obama to sign a bill into law this fall, the legislation’s main provisions -– the employer mandate, a federal health insurance exchange, subsidies and a public option -– wouldn’t go into effect until 2013.

In the meantime, health-care costs are projected to rise. In 2010, U.S. employers are expected to see a 9% jump in their health-care costs, according to a recent PricewaterhouseCoopers survey of more than 500 employers and health insurers.

To help soften the blow of a health care price hike, small businesses should weigh their potential cost saving strategies today. For companies with a Jan. 1 renewal date, the rest of the year is prime time for negotiation, says Joan Smyth, a principal at Mercer, a health and benefits consultancy in New York. “We are in the thick of it,” she says. “At every renewal, the employer considers plan changes to mitigate the renewal increase.”

On that note, here are seven strategies to contain health-care costs:

Get group coverage

Forming or joining a group can yield cost savings because groups of policy holders typically have more negotiating power than single payers, says Steve Trattner, the president of Cinergy Health, an insurer in Miami. In states including Florida, Delaware and New Hampshire, sole proprietors can form “group of one” plans, in which individual owners may access group rates and guaranteed access to health insurance, regardless of their pre-existing conditions. Many other states require a group to contain at least two people. (For more state-specific information, click here. And for more on health care options for sole proprietors, click here.)

Group coverage isn’t always cost effective. For instance, some states mandate that group plans provide loads of health benefits, such as prenatal care, that some plan participants might not need, Trattner says.

Bundle services under one provider

Just as auto insurers will often give their customers a break on additional policies, health insurers may offer discount rates for companies with more than 50 employees, says Smyth. “If [you] give your company’s medical, dental, life insurance and disability policies to a single provider, such as Aetna, Cigna or UnitedHealthcare, they [may be] more willing to negotiate,” she says.

In addition, if you have a sister company, approach them about teaming up, says Smyth. “You can still have different plan designs,” she says. However, having the same parent allows you to apply together — and potentially qualify for lower premiums, Smyth says.

Consider joining a purchasing coalition

All businesses can join forces to lower medical costs through pharmaceutical purchasing coalitions. Under a purchasing coalition, companies are still required to purchase their own health insurance. However, trade unions and industry associations like the International Union of Bricklayers and Allied Craftworkers and the HR Policy Association offer businesses the chance to pool their combined work forces to secure less expensive drug coverage.

If you live in Minnesota or Washington State, you can also take advantage of group purchasing power in a health co-op –- a group that negotiates pricing with medical service providers beyond the pharmacy.

Make transparency a priority

Purchasing coalitions typically require drug prices to be clearly presented to employees. Knowing the actual cost of a drug and treatment alternatives might drive employees to choose less expensive procedures. “If you give [employees] clear visibility into what is going on, they can understand what they are paying for and how they are paying for it,” says Burton Goldfield, CEO of TriNet, a human resources outsourcing firm in San Leandro, Calif.

Offer a consumer-directed option

For transparency, consider a shift to consumer-directed health-care plans, such as a health savings account or HSA-qualified plan, in which employees pay for medical expenses such as co-pays and medications using pretax dollars. Because these plans demand high deductibles, employers typically pay reduced premiums, Goldfield says. Employees are required to pay for more out-of-pocket expenses, but by using HSA funds, employees get to keep more within their accounts when they spend less, he says.

Wellness plans

Wellness plans go hand-in-hand with high-deductible plans, Smyth says. “Employees who enroll in high-deductible plans need to stay healthy,” she says. And wellness programs promote healthy behaviors because employees agree to screenings and preventative care. As a result, employees tend to be healthier and employers will often receive lower premiums, Smyth says.

Pare down your plan

Some owners are choosing to pass on more costs to employees. Through so-called limited medical plans, employees receive a 100% benefit of up to $100 for five visits per year without paying a deductible, says Trattner from Cinergy. “Through this plan, people are encouraged to seek care earlier,” he says. But do some research. These plans provide only limited hospital coverage, Trattner says.


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