Controlling health insurance costs with a preexisting medical condition.
Jeff Kinni, chairman of Preferred Marketing Agents, a Pompano Beach, Fla., manufacturers' representative serving the restaurant industry, has been losing sleep over an insurance nightmare. Comprising only five employees, Kinni's work force is not big enough to spread the cost risks that insurance companies calculate for a preexisting cancer case. "Our rates were rising by unbelievable amounts every six months," he complains, "30%, 60%, no end was in sight."
Under normal circumstances, Kinni's insurance broker might have solicited competitive bids from other carriers. But, says Kinni, "we had to stay with our carrier, because any new insurer would force us to accept a rider that would disallow all costs relating to preexisting conditions. So the person with cancer would suddenly wind up without protection."
Like the heads of other companies in this bind, Kinni was forced to respond first, by looking for every possible way to put a lid on current cost hikes. "We raised our deductible from $250 to $1,000 and cut back on maternity benefits," he says, "which kept our most recent increase down to 20%." Those changes weren't appealing, but Kinni viewed them as essential to keeping the company's health-insurance bill from driving him out of business.
His second strategy focused on a longer-term solution that in the future might allow the company to broaden its scope of health benefits. "We'll demonstrate to insurers that it won't be excessively expensive for them to cover our company. When we've built up a good claims-loss record, we'll try to switch" -- that is, just so long as Kinni can persuade an insurer to agree to a temporary, rather than permanent, moratorium on payments for preexisting conditions. "But once we demonstrate a pattern of controlled costs," he says, "that will be an option for us." -- Jill Andresky Fraser
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Driving Down Health Care Costs (Panel Publishers, New York City, 1991, $89), a collection of 44 articles, is a simple way to tap into savvy strategies currently recommended by insurance and benefits practitioners to reduce insurance fraud, audit for cost savings, redesign retiree benefits, and more.
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