3 Mistakes Businesses Make in Buying Health Insurance and Employee Benefit Plans in Virginia
Healthcare benefits, health insurance, medical benefits; whatever you want to call them- healthcare in the U.S. is under unprecedented scrutiny. The course of healthcare reform is uncertain at this point- but what is certain is the pain of paying for health coverage by employers and their employees. There are some relatively easy steps that employers can take to lower costs now and make sure they haven´t made one of several common mistakes in providing medical benefits.
Mistake 1. “Cadillac Plans”
Rich benefit plans are always a crowd pleaser… and why not? It´s only money. If your company is obligated by a labor union agreement to provide a plan that reimburses most every medical expense, then you have no option. Otherwise, the money spent on a “Cadillac”health plan is a waste. Congress has put overly-generous plans in the spotlight recently by proposing to tax them to pay for part of the reform effort.
There is much “trading dollars” on these plans. This is where payments are sent to the insurance carrier, and sent back in small amounts when claims are filed. The difference in cost between effective plans and “Cadillac” plans is 20% or more in Virginia. How many doctor visits can be paid for with the difference? 20% of the employee cost of around $400 per month is $80 or $960 per year. That will pay for quite a few visits. Why pay for these potential visits in advance? The insurance carrier isn´t going to return the dollars if they aren’t used.
Mistake 2. Employees Don´t Have “Skin in the Game”
Employees have understandably developed a sense of entitlement concerning benefits. In my benefits practice, I encounter employees every month who believe employers must provide health benefits under state law. They are shocked to learn that their company is not obligated to provide benefits at all. This entitlement mentality is further ingrained by “Cadillac” plans discussed above.
“Consumer driven health plans” give employees “skin in the game” by using financial incentives to encourage employees to seek better value in healthcare spending. They link lower cost high-deductible health plans with cash accounts that give employees greater control over their healthcare spending. Studies generally show these are effective in lowering the overall costs of healthcare and, when properly designed with preventive care incentives, don´t reduce the quality of care. Forward thinking companies have embraced these tools as a method of recapturing funds needlessly paid to insurance carriers through “trading dollars” on small claims while preserving the protection from catastrophic loss employees need… but don´t always appreciate.
Mistake 3. Working with an Incompetent Broker
Work only with professionals who specialize in healthcare and employee benefits. Employee health insurance is a complicated, heavily regulated industry that requires the expertise of a specialist.
When your company receives a rate increase, don´t just accept the increase and the options for “buy down” plans. Get a real explanation of why your rates increased from your broker. The renewal rates should be available a minimum of 45 days prior to your renewal date, and you should never have to ask for the numbers. Your broker should not only search the market for the best rates, he or she should provide strategies that meet your objectives. He should discuss contribution strategy, offer an HSA or HRA option, and confirm your company´s competitive situation. If he or she simply hands you a spreadsheet and points to the lowest number, get a new broker….. FAST.
Call Advanced Benefit Strategies of Virginia: (757) 536-4554