Friday, October 24, 2003

Health insurance costs can be controlled

Steve Polott

Today employers and individuals are being faced with rapidly escalating costs for health insurance and are desperately looking for lower-cost alternatives. I have been involved in all facets of the group health benefits arena for the past 22 years and I have seen many cycles in the various products offered both in Nevada and nationally. Most plans, if not all, have substantially increased in cost. New technology, prescription drugs, and higher hospital and physician charges all have contributed to the circumstances we find ourselves in today.

For years, the term HMO (Health Management Organization) was considered a "dirty word." HMOs were associated with lesser-quality care, restricted benefits and limited to a regional area. We now are finding that business owners and their employees are quite satisfied and familiar with the system and in most cases feel more at ease using the HMOs, primarily because the out-of-pocket costs and co-pays are spelled out in the policy. The advent of the PPO (Preferred Provider Organization) allowed employees and their dependents to utilize preferred, contracted physicians at lower out-of-pocket costs and also gave them the freedom to see any doctor, in most cases worldwide. POS (Point Of Service) plans are truly the merger of HMO and PPO benefits, allowing members to utilize HMO or PPO benefits depending upon the specific care required.

It has become quite apparent that we will continue to see double-digit increases in the years to come. Until then, we, the consumer, realize that it is up to us to take responsibility by smart selection of plan use. The days of employers solely being responsible for controlling costs by changing to higher annual deductibles and co-pays are about to change. We are finding that it is necessary to implement a team effort between employer and employees to control the increasing costs of group health benefits.

Consumer-driven health plans and health reimbursement accounts are the new "hot topic" of discussion throughout the industry. These programs are primarily employer funded and are usually attached to a high deductible plan. The employer will generally purchase a high deductible program (such as $1,500) but leave the employee with a $500 deductible. The employer saves significant premium dollars by purchasing the high deductible plan and will then fund any cost in excess of the $500 paid by the employees, until $1,500 is met. Once $1,500 is reached, the plan takes over and claims are processed accordingly. This type of new plan design gives businesses the opportunity to provide quality health care for their employees, where they may not have been able to in the past. These plans still allow employees the option of choosing their own physician, but will reward those who opt to try alternatives before rushing to their various primary care physicians or urgent care facilities. Educating employees to make wise choices when using their medical coverage will result in lowering the cost of their health care plans. However, HMOs may still provide the greatest cost savings to both the employer and the employee.

In order to control costs for employee benefits, the primary step for employers should be to select a qualified, reputable, licensed consultant, who can investigate all available health care options and tailor a plan specific to the needs of the entire group. Many insurance carriers are providing multi-year rate guarantees or rate caps so a business can budget their employee benefits for longer than 12 months. Many employers are opting for two or more insurance plans to be offered within their company benefits. The first plan comes with a lesser cost that still provides for first-dollar coverage, but is more restrictive in nature. And a second plan is available to employees who are willing to contribute more per pay period to "buy-up" to a richer, more flexible plan. This allows the employer to reduce his cost for employee benefits and shifts some of the burden to the employees.

Controlling costs is high on the list for all major insurance companies, not just in Nevada but nationwide as well. Providing a wide selection of low-cost alternatives with higher deductibles and co-pays for all aspects of care, discount pharmacy cards, and also educating consumers to the most efficient and economic use of their health care coverage is a top priority for everyone in the health care industry.

Steve Polott is senior vice president of Insurcorp, an independent insurance consultant company in Las Vegas, specializing in employee benefits, property and casualty products and comprehensive financial planning. Polott has more than 22 years of experience in the healthcare and insurance fields.