At more than $500,000 a year, health insurance is our company’s No. 2 expense, second only to payroll. We’ve worked hard to continue to offer 100 percent coverage for all of our 150-plus employees.
A good broker is key to controlling the high costs of medical benefits, and it’s beneficial to find a large brokerage firm with value-added services. One such service is offering a “health advocate” for employees to contact. This person can offer a variety of services, including patient advocacy, prescription drug approvals and access to specialists.
Without the help of this type of advocate through the broker, employees are left asking the shop owners or management for help navigating the complicated healthcare system, which can detract from day-to-day operations.
In addition to advocacy, a good brokerage firm may offer assistance with some human resource issues such as COBRA and family medical leave. Overall, the resources they offer might save you the equivalent of a $50,000- to $70,000-a-year staff member.
Once your broker has suggested some plans, I highly recommend meeting in person to make sure you really understand all the details and options. Medical insurance is complicated, and I don’t think just comparing plans on a spreadsheet is enough to make the best decision for your business.
Another way to reduce cost is by making our employees better consumers when it comes to healthcare. We encourage that by using a healthcare reimbursement agreement (HRA) rather than a traditional insurance plan. An HRA is similar to a health savings account (HSA) plan in that it has a high deductible — $2,000, in our case. But it also has an important distinction from an HSA, which I will explain below.
To help offset that high deductible, we give each employee a special type of pre-paid card loaded with $1,000 that can be used, for example, toward their co-pays. It’s a “smartcard” that allows its use only for healthcare services, and prevents it from being used for groceries, clothing or anything not associated with the healthcare plan.
Because employees want to get the most they can from that $1,000 (and their own out-of-pocket medical spending), they become better shoppers for healthcare. As with everything, healthcare prices vary. You can pay $80 for an X-ray, or you can pay $350. You can spend $100 on a prescription, or $4. This plan really encourages employees to do what all of us should do: be smarter consumers of healthcare.
Entering our third year with an HRA plan, we did make one change regarding emergency room visits. Those now have a $200 deductible. In the past, an employee with the flu might go to the ER and swipe the card rather than choosing a more sensible method to get appropriate medical attention. Similarly, prescriptions carry standard co-pays.
These changes are important because of one key provisions of our HRA. If an employee doesn’t use all of the $1,000 on the pre-paid card, that money is returned to the business. That’s why we chose this plan over an HSA, in which the unused money generally rolls over to the next year and belongs to the employee, even if he or she leaves the company.
With the HRA, we receive a monthly usage report. Privacy laws conceal the type of healthcare received, but we are able to track the value of the cards. This data provides us with some guidelines for future healthcare renewals, helping us focus on the important healthcare needs of our employees.
Under our initial plan three years ago, employees used 40 percent of everything we placed on the pre-paid cards. Once we added the ER deductible and set standardized co-pays for prescriptions, the amount of the pre-paid total used dropped to just 18 percent. That’s a huge savings.
Healthcare insurance is, and will remain a major expense. That’s why it’s so important to work with a broker who can offer you viable options and valuable added services, and to encourage your employees to spend healthcare dollars wisely.
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