How to Save on Your Health Insurance

How Did We Get Here?

Indemnity Plans Deductibles and Co-insurance True Fringe Benefit Single Coverage $35.00 Family Coverage $105.00

HMOs Co-pays In-network Coverage Only Managed Care

1994 NJ Small Group Reform Standard Plans Guaranteed Issue No Pre-existing Conditions Dozens of Carriers Single Coverage $ Family Coverage $500.00

2007 Limited Market 7 Carriers Wide Array of Plans High Deductible Health Plans Single Coverage $ Family Coverage $1,200.00

Now That We Are Here, How Do We Save?

Easiest Way to Save Employees Pay More of the Cost Higher Payroll Deductions or Higher Cost When Utilized

Raising Cost of Utilization to Lower Overall Premium

Office Visit Co-pays Co-pays available up to $50 Split co-pays –$15/$30 –$20/$40 –$30/$50 Every $10 increase in co-pay is worth approximately an 8-10% decrease in premium

Prescription Options Increase Co-pays Three Tiered Co-pays Deductibles and Co-insurance Going from two tiered prescription co-pays to three tiered prescription co-pays can reduce costs 5-6%

Ways to Lower Costs Without Reducing Benefits

Self-Insurance and the Rule of 80/20

Self-insurance means taking some risk away from the insurance company and putting it on the employer. This is done routinely on the property and casualty side through the use of higher deductibles. We can use the same concept with health insurance.

There are three main areas where we can use the self-insurance concept: Hospital Co-pays Deductibles In-network High Deductible Health Plans

The Rule of 80/20 80% of claims come from 20% of covered participants 70% of all covered participants have less than $1,000 of claims in a year

Daily Hospital Co-pays Range from $125 to $750 per day or per admission Save premium dollars of approximately 8% and self-insure the hospital co-pay

Self Insure Hospital Co-pays Example: Group of 15 singles and 15 families Monthly premium without hospital co-pay: $30,315 Monthly premium with $300 hospital co-pay: $27,930 Monthly Savings$2,385 Annual Savings$28,620 Break even point95 Hospital Days

In-Network Deductibles These deductibles apply only to hospital and facility charges and outpatient surgery Generally the deductible is from $1,000 to $2,500

Self-Insure the Deductible Example: Group of 15 singles and 15 families Monthly premium without in-network deductible $30,315 Monthly premium with $1,500 in-network deductible$17,775 Monthly Savings$12,540 Annual Savings$150,480 Maximum exposure of deductibles$67,500 Net minimum savings to employer$82,980

High Deductible Health Plans These plans must have a minimum deductible of $1,100 per single and $2,200 per family. More common deductibles are $1,500 or $2,500 per single and $3,000 or $5,000 per family. All expenses, except preventive care, are subject to the deductible. These plans are eligible to be paired with Health Savings Accounts (HSA).

High Deductible Health Plans and Health Reimbursement Accounts Instead of contributing to a HSA for each employee, which becomes the employees money, self-insure the deductible through use of an employer funded Health Reimbursement Account (HRA). The HRA is only funded to the extent the deductibles are used. The employer pays as the expenses are incurred. As a result, the employers liability is reduced.

Example: Group of 15 singles and 15 families Monthly premium $30 co-pay POS plan $30,315 Monthly premium $2,500 HDHP $13,445 Monthly Savings$16,870 Annual Savings$202,440 Maximum Exposure of Deductibles$112,500 Net Minimum Savings to Employer$89,940

Samuel L. Stettler PO Box 937 Flemington, NJ phone – fax