Business.com - How To Save Money On Health Insurance Benefits

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Explore the main decision factors of consumer-driven health insurance

BIO:

Randy Philip is a principal consultant at the Washington Insurance Consulting Group.

TRANSCRIPT:

I'm Randy Philip, Principal Consultant with the Washington Insurance Consulting Group located in Alexandria, Virginia. I and my two partners have over 70 years of experience working with employees and employers in designing health insurance and employee benefits for small to medium sized businesses.

Today we're going to be talking about how to reduce your health care costs. There are a number of factors that go into the pricing of a health insurance plan. For example, deductibles and copays. The larger the deductible that the employer selects or the larger the copay that the employer selects, the lower the premium is going to be.

Another factor is coinsurance. Coinsurance is the piece of insurance that the employee will be sharing with the insurance company. The larger the coinsurance that the employee picks, going from 20% to 30% to 50%, the lower the premium is going to be.

Group demographics: that's the makeup of your group—the average age of the group, the male/female content of the group, the location of where your group is. That's where an underwriter looks at your group and assesses the medical viability of your group, and they're going to rate you based on the medical conditions that are going on in your group.

Let's talk about ways that an employer can reduce his cost. First thing is, in assessing the needs of the employees, you really want to look at making sure that the plan designs that you're offering exactly meet your employees' needs. A typical employer might offer a PPO plan. A PPO plan is a plan that allows employees to go inside and outside the network. Well if your employees are not going outside of the prescribed network, you might be able to reduce that plan to an HMO plan, which allows your employees to exclusively use providers in the network, and that would reduce your cost.

Increasing your deductible or increasing your copays. For every $100 that you increase your deductibles, that's typically a 2-3% savings in the annual premium, and similar with increasing your office copay. Another way for employers to reduce their costs is to move their employees to a consumer-driven plan, or at least offer that as an option for your employees. They drastically reduce the cost of health care. They drastically reduce the premium amount that the employee or employer would pay.

So again, the key factors in determining your health insurance costs are of course going to be your deductible/coinsurance, the plan type, the group demographics, and the medical underwriting. Those are going to be key factors in developing the rate that the insurance carrier is going to return for your group.

This has been Randy Philip, Principal Consultant with the Washington Insurance Consulting Group located in Alexandria, Virginia for business.com. Please remember the following points we discussed today.

Tips to lower health plan premiums
• Increase deductibles and copays
• Offer an HMO plan
• Offer consumer-driven plans

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