At Wagner Appliance Parts, a distributor in Allentown, Pa., management is serious about controlling health-insurance costs for the 55-person staff. "Insurance is a very expensive cost -- not a benefit that our employees are entitled to," explains William Koscinski, Wagner's controller. "In 1989 we decided to control that cost by setting a limit on how much we would pay per staffer toward coverage."

The guidelines are strict: During 1993 any employee who elects to purchase coverage is subsidized by Wagner at $122.50 a month. Staffers must pay the rest -- this year, about $20 a month for individual coverage and a hefty $245 a month for family coverage. The results? Since 1990 Wagner's annual health-cost increases have averaged around 11%, while smaller companies typically have faced hikes of 20% or higher.

There is a sweetener for employees: last year Wagner set up a flexible spending account (FSA) to permit payment of health-insurance premiums from pretax salaries. "For someone, like me, who buys family coverage, the tax savings from participating in the FSA amount to about $500," says Koscinski.

Wagner found that there's almost 100% buy-in from employees, and that managing the FSA is a snap. "All kinds of insurance and accounting firms tried to convince me we'd need their help in administering the plan, but actually, it's quite simple to do if you're computerized and already handle your own payroll," says Koscinski. For more information, order free IRS booklet 535 (call 800-829-3676), a 50-page publication that includes advice on FSAs.

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