For Peter Hermann, health insurance is a headache. "Health insurance is a remarkably large expense, even for a 15-personfirm like ours," says Hermann, a general partner of Heritage Partners, a private-equity investment firm in Boston. "You can'thire and retain good people without a good benefits package. But as managers, we need to spend an inordinate amount oftime thinking about health insurance -- not only because the costs keep rising but because the marketplace is so volatile.There's a forced need to keep reevaluating your company's coverage as insurers pull out of certain types of products or makeother major changes."
What should you do when your company is faced with a health insurance rate hike? Obviously, you can shop for a new planor increase employees' contributions. But what if you've already tried those options? While there isn't a miracle cure, hereare some additional strategies to help keep health insurance costs down:
One suggestion is to remove those niches from your basic health care plan when you are comparison shopping amonginsurers. Then contract for each of those niches with managed care specialists that can fine-tune your coverage so that itremains a meaningful, but controlled, benefit for employees.
"It's amazing the way a well-planned copayment charge will discourage employees from using the company plan for everyprescription drug they've ever heard of that might or might not turn out to be necessary," Gregory explains.
It's also important to make sure that your cuts yield meaningful savings. For example, many businesses now have plans thatoffer employees some sort of choice between managed care and traditional indemnity coverage. Gandolfo often finds thatbusiness owners who offer a choice try to lower costs by increasing the deductibles or copayments on the indemnity plan(which generally is the more expensive option for the employer).
"I hear it all the time from clients," Gandolfo notes. "They say, 'How can it be that you won't knock 10% off my costs if I'mwilling to sign up for a $1,000 deductible on the indemnity coverage?" However, Gandolfo says, it doesn't work that way.Insurers realize that most employees will sign up for the managed care option, which means that's the place where you needto make meaningful cuts.
Gandolfo's recommendation for real bottom-line savings? Raise your managed care copayment charge on "in-network" officevisits from, say, $5 to $10 or $15.
Her recommendations: Stay in touch with your insurance broker or consultant throughout the year to make certain your plan iskeeping you on track. Be prepared to make annual adjustments to your existing plan(s) to respond to changes within themarketplace or your employee base. And, of course, comparison shop among insurers every few years to find out whether abig switch makes sense.