Where The Money Goes

By: Peter Joseph

As a business owner, you've come to expect big increases in your employee health insurance premiums of late. Employer-sponsored health insurance premiums increased an average of 11.2 percent in 2004, and this was the fourth consecutive year of double-digit growth, according to the recent Annual Employer Health Benefits Survey released by the Kaiser Family Foundation.

That's about five times the rate of inflation nationally, and probably significantly higher than the price increases your company has imposed on its products and services in the same time frame.

The reasons for these increases are not mysterious. The largest share of the ongoing increases track to increased utilization of advanced medical technologies - new diagnostic and preventive screenings, and other high-tech therapies and medical hardware - the majority of which are delivered at hospital on an inpatient or outpatient basis.

Prescription drugs also continue to play a major role in the rising cost of health care, owing to the higher prices of new formulations, the wider application of combination therapies and greater consumer demand for, and need of, medications in all areas of prevention and treatment. About the only area that has seen relative stability is physician costs.

Such increases, when they are part of the costs of running your business, are naturally cause for concern. It only makes sense that employers who want to continue offering their employees access to quality health care become more knowledgeable about how well their money is being spent by the health care carrier they choose.

For example, did you know that virtually all carriers in Florida spend roughly the same percentage of your premium dollars on medical claims - which works out to a medical loss ratio of 76 percent to 80 percent? They also spend about the same percentage, 10 percent to 12 percent, on administering your plan (processing claims, providing customer service functions,
covering fixed costs).

And most of the carriers factor in a 2 percent profit margin. The balance of your premium dollars go to the commissions, which carriers pay to the independent health insurance brokers who act as consultants. Brokers are, of course, a critical element in matching clients with carriers. Most small business employers don't have the time or staff to determine the best package of benefits for their group, shop the market for bids and compare product offerings carefully.

They depend on their broker to explore the different options, give them objective recommendations on the best choices and complete their applications. And brokers' services may often continue after enrollment. It's extremely valuable for employers to better understand where their premium dollars go. Don't hesitate to ask questions to fully recognize why one health plan may be preferred over another.

Employers can exercise some control over their costs by finding a health benefits company that provides the best value for their company's premium dollars. The way in which you shop a health plan can impact the price.

It's the same as if your travel agent had a great deal for you - air, car, hotel and meals included. You tell your agent to book it. Coincidently, your neighbors just booked that same trip for $1,000 less through their travel agent.

One agent shopped for the best price, the other agent arranged the trip through his or her vendor of choice. Whether it's a family vacation, buying a car or choosing a health benefits plan, how you shop can impact your cost.

So why are health care premiums different? Take a closer look.

Author Bio
PETER JOSEPH is senior vice president for commercial sales for VISTA, a health benefits company headquartered in South Florida with more than 330,000 members. VISTA, through its
affiliated companies, Vista Healthplan Inc., Vista Healthplan of South Florida Inc. and Vista Insurance Plan Inc., offers a choice of health benefit plans, including health maintenance
organization (HMO), preferred provider organization (PPO) and pointof-service (POS). Reach Joseph at (954) 858-3000 or through VISTA's Web site, Vista Health Plan

Article Source: http://www.ArticleGeek.com

Educated Choice - How to Control your Health Care Costs

By: Cathy Aguirre

How to control health care costs continues to dominate discussions among benefit administrators, chief financial officers, CEOs, insurance brokers and health benefit companies. When you lower your costs, your employees often react by thinking they will receive fewer benefits.

Offering a choice of plans, having a sensible contribution strategy and providing employee education can hold costs down and satisfy employees.

Choice, choice, choice

Offering a choice in benefit plans, choice in network access and choice in monthly costs are some of the best ways to keep health care costs affordable. Whether you have 20 employees or 1,000, find a health benefits company that can offer you several plans for employees to choose from.

Typically, employers offer very little choice in health benefit plans. Successful benefit administrators understand that every employee has unique health care needs. Why not offer employees three or four plans to choose from?

The level of benefits employees choose will relate directly to how much they utilize health care services and what they can afford. Most health benefit companies offer the following types of plans.

Traditional HMO

Lowest-cost plan, all care is coordinated by a primary care physician; employee must stay in network

Open access

A slightly higher-priced plan allowing the employee the freedom to selfrefer to specialists in the network. More freedom equals a higher cost.

Point of Service (POS)

A less affordable plan for most, with more freedom; employee can access HMO benefits/network and/or pay higher co-insurance and choose any doctor

Preferred Provider Organization plan (PPO)

Greatest freedom, highest cost; total network access and out-of-network benefit, self-refer to specialist

Developing a contribution strategy Now that you have decided to partner with a carrier that can offer your employees the choices they need, how do you stay within your company's budget? The answer is simple - be fair and consistent by implementing a defined contribution strategy that fits your company's budget. This process can be accomplished in two easy steps.

1. Determine what dollar amount per employee your business can afford.

2. Select a carrier that can offer you four plans that will satisfy your employees' health care needs.

Here's an example of how a defined contributions strategy could work for you (based on a health benefits budget of $180 per employee, per month).

In the example in the chart above, your company accomplished two very important goals: You controlled your company's costs and you offered your employees choices.

With a defined contributions strategy, your employees are responsible for evaluating what they need and how much they are willing to pay.

A choice of plans with a defined contribution strategy is two-thirds of the employer's cost saving equation. By adding employee education, you could see a change in behavior that can lead to significant savings. The more informed employees are about the true cost of health care and how their choices directly affect their pocketbook, the more likely they are to become "partners" in controlling costs.

Most health benefit carriers provide members with an Explanation of Benefits for all claims processed, which contains the cost of services. Web-based tools offer plan information and are user-friendly. At workshops and mandatory open enrollment educational meetings, employees can speak directly with a carrier representative.

As health insurance premiums continue to rise and more employers face very difficult decisions, offering a choice of plans can keep your employees happy and satisfy your bottom line.

Author Bio

CATHY AGUIRRE, vice president of account services for VISTA, has more than 18 years of experience in managed care marketing. Aguirre provides leadership for all of VISTA's commercial accounts, which include Broward County government, The School Board of Broward County, Broward Sheriff's Office, Miami-Dade Government, Sears, Walgreen's and United Airlines. Reach her at (954) 965-3471 or cathy.aguirre@vistahealthplan.com.

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