By putting individuals in charge of spending their own money on everyday medical needs while still providing coverage for serious conditions, HSA plans are designed to make people more astute consumers of health care. But opponents worry that some people, particularly low and moderate wage earners, will forgo necessary medical treatment -- leading to more severe conditions and expensive emergency room visits down the line. "If a person's barely making it and suddenly finds himself responsible for a deductible that's a couple of thousand dollars, that's when I worry about him not getting the care he needs," says Elliot Wicks, a senior fellow at the Economic and Social Research Institute in Washington, D.C.
Still, some early adopters of HSA plans report significant cost reductions. Sumer Inc., a manufacturers' representative for semiconductor makers in Rolling Meadows, Ill., switched to an HSA plan with Destiny Health in January 2004. Over the previous four years, the company's premiums had skyrocketed 100% to $162,000 annually, says Sumer's president, Craig Anderson, whose grandfather founded the firm 50 years ago. With the HSA plan, annual costs dropped to $124,000, a savings of 23%. What's more, Anderson says he and his 24 employees secured much better coverage. The company's previous health plan featured a $500 deductible and 80% coverage in network and 60% out of network. The HSA plan has a $1,500 deductible for individuals, $3,750 for families, then 100% coverage in network and 80% out of network. Sumer makes it easier on his staffers by contributing $1,000 a year to an HSA for an individual and $2,500 for families. As a result, an employee with single coverage pays $500 out of pocket if she stays in network -- compared with $500 plus 20% of costs under the old plan.
3. Find a broker who works for you
Selecting the right insurance broker is as important as picking a health plan. Nearly 80% of benefits managers turn to their brokers first when crafting their plans, according to a survey of companies with 10 to 500 workers by Employee Benefit News and Genworth Financial. And 70% say their brokers make or greatly influence the decision of which benefits to offer. A good agent takes the time to get to know your business and understand your financial goals -- as well as your limitations. Your broker also should suggest ways to cut costs and keep you informed of industry news. So here are some questions to ask yourself: In the past year, has your broker discussed recent legislative changes to COBRA? Have you talked about how HIPAA will affect your business? Has your broker explained Section 125 plans, which reduce payroll costs and let employees pay their share of health care premiums with pretax dollars? If not, it's time to shop for a new broker.
Entrepreneurs also should be mindful of how their agents are compensated. Commissions vary depending on the product line and the carrier but typically range from 2.5% to 5% of the annual premium, says Ramsburg, at EBD Financial. In other words, if you've been socked with a 25% increase on a $1 million policy, your broker just scored a nice fat bonus. Make sure he or she is working for that pay.
4. Tweak the finer points of your plan
Sometimes one phone call can lower your rates dramatically. Just ask L. Bart Adams, operations manager at Mountainview Mushrooms, a producer of fresh mushrooms in Fillmore, Utah, with $8 million in annual revenue. Fillmore is a rural community, he says, so the company's 120 workers mainly get medical care from local providers. Why then, he wondered, should the company pay for networks with doctors and hospitals two or three hours away if its employees rarely use them? He called the hospital administrator at the nearby Fillmore Community Medical Center and asked if the facility would be willing to join a more limited provider network affiliated with Mountainview's insurance plan. Done, the administrator told him. His insurer, Regence BlueCross BlueShield, signed off on the change, and Mountainview will reduce its premium increase from 11% to just 6% this year, Adams says.
That's not the only way to modify your coverage. With the cost of hospital care up sharply in recent years, for example, some plans, such as Blue Cross of California and Tufts Health Plan, now offer tiered hospital networks that operate much like the in-network/out-of-network policy for doctors. In such a system, hospitals are assigned a tier based on such factors as cost and quality of care. Cost-sharing varies, depending on the tier -- a copay at a tier-one facility might be $50 a day, for instance, and $150 a day at a tier-two facility. Deductibles and coinsurance can also differ. "All of these arrangements can lower premiums," says Paul Frostin, director of the health research and education program at the Employee Benefit Research Institute, a nonprofit research group in Washington, D.C. A facility with a lower copay isn't necessarily inferior to a more expensive one, Frostin adds. In fact, it may boast lower readmission or complication rates, two factors that can help reduce your overall cost of hospital care.
Then there are the standby modifications, like raising deductibles and copays. According to the Kaiser study, 42% of small firms are very or somewhat likely to boost deductibles this year and 38% expect to raise the amount employees pay for prescription drugs. Another option to consider: Switch from a flat dollar copay on prescriptions to a percentage copay with a minimum/maximum dollar contribution, says Chris Robbins, CEO of Arxcel, a consulting firm in Buffalo that helps employers design prescription benefit plans. Instead of a flat $20 prescription drug copay, for example, an employee would pay, say, $10 or 20% of the price of the prescription, whichever is higher, up to a maximum of $75. Such copays "keep pace with inflation," he says. "The employer doesn't have to be the bad guy and raise the copay year after year."
