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Saving On Health Insurance Premiums

Written By: Richard A. McGrath, CIC, LIA
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The key to savings on health insurance premiums is to have employees spend less on healthcare. That means either having healthier employees or having your employees use less medical care. Recognizing that healthier employees will be happier and more productive, in addition to helping them control healthcare costs, many employers offer smoking cessation programs, employee assistance programs (EAPs), reduced costs for health club membership and other programs that can help control costs long-term. A more immediate way to control costs, though, is to have employees use healthcare wisely, avoiding unnecessary visits to the doctor and especially trips to the emergency room. How can you accomplish this?

Indemnity Plans vs. Managed Care
Today, many people will visit their doctor for almost any reason, because the cost is relatively inexpensive – even though the overall cost of healthcare has been soaring. That’s because, under today’s managed care system, patients pay about $10 or $20, and insurance picks up the rest – whether the patient makes an appointment or goes to the emergency room.  While co-pays have increased, seeing a doctor is still relatively inexpensive – and when something is a bargain, consumers consume more of it.  These costs add up and are a significant factor in today’s rising healthcare costs.  In years past, under the old “indemnity” health insurance system, anyone who needed to see a doctor would schedule a visit and pay for the visit immediately out of pocket.

Higher Deductibles
Employers can help control their healthcare premiums and encourage employees to avoid unnecessary healthcare by purchasing coverage with a high deductible.  When consumers have plans with higher deductibles, they recognize the cost of care and are more likely to forego unnecessary care.

However, it’s important for employers to offer employees something in return for accepting a higher deductible.  Health Reimbursement Arrangements (HRAs), for example, can help employees make up the difference. The result is a lower overall cost for employers, no change in costs for employees and an improved awareness of the costs of healthcare.

Other Steps
Other steps employers can take to reduce their health insurance costs include the following:

  1. Have your insurance agent audit your policy.  Make certain you understand the terms or your insurance and how it works.
  2. Educate your employees.  Make certain employees also understand the terms of their coverage and have them sign off annually on the coverage of dependents. Many dependents maintain coverage even after they no longer qualify.
  3. Educate employees on how to use their health insurance efficiently. Make them aware that unnecessary use of healthcare services today will increase their premium costs in the future.
  4. Provide health care seminars and services to keep employees healthy.

Richard A. McGrath, CIC, LIA is President and CEO of McGrath Insurance Group, Inc. of Sturbridge, Mass.  This article is written for informational purposes only and should not be construed as providing legal advice.

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