Health Insurance: Cost-Cutting Strategies
Van Leer Chocolate was being hammered by double-digit health-insurance-premium increases because of what controller Tom Thoelen describes as "an unusual run of claims" -- freak accidents or onetime incidents that gave the company "bad experience." Van Leer, a Jersey City, N.J., company that insures 70 employees, eventually hired a benefits consulting firm called Pentech Corp. to help analyze its claims and negotiate with carriers -- a move that Thoelen says saved about $150,000. Although Pentech has the clout of being able to negotiate with carriers on behalf of several companies, many of its strategies can be replicated by companies willing to put in a little time and effort. Pentech CEO Aaron Berg explains:
? "Analyze your claims and determine which ones are nonrecurring," he says. "Say you had a premature birth that cost $200,000. The insurance company would love to amortize that back into your premiums." Also, compare actual claims with expectations based on your demographics. For instance, says Berg, "if you have 85 people and they're all single, you don't want to be charged full rates on maternity."
? "Look at whether what you're buying is being used," Berg recommends. Van Leer decided to lower its psychiatric coverage, since so few employees were using it. "Go to the insurer and ask what it might cost to eliminate or reduce underused benefits," says Berg. "At times, it's a great idea to self-insure some benefits if you feel you must maintain them."
? Administer COBRA properly. Employees who leave your company should be taken off the health plan immediately and notified of their COBRA options. If they opt to pay for their coverage within 60 days, any health-care costs they've incurred during that period will be covered. Most employers, says Berg, leave employees on the plan, often incurring health-care expenses for those who, after the 60-day period, don't elect COBRA coverage.* * *
DONNA FENN is the author of Upstarts! How Gen-Y Entrepreneurs Are Rocking the World of Business and 8 Ways You Can Profit From Their Success, an exploration of the ways Gen Y is changing the entrepreneurial landscape.
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