With business comes the opportunity to hire more people. Good news for a company, right? The answer is yes, until employers look at the price of benefits and the reality of what those employees truly cost the company, over and above typical compensation numbers. This reality can lead many small businesses to cut out health coverage altogether, and larger companies to push the costs on to employees who can't handle them.
How can you find a health-care solution that will satisfy the needs of both the employer and employee? The answer may be a limited-benefit medical plan, also known as a "mini-med plan."
According to the National Survey of Employer-Sponsored Health Plans, the average total cost of health benefits rose from $6,215 per employee in 2003 to $6,679 in 2004.
SurePayroll, a Chicago-based online payroll service, reported that among small-business customers, as many as 350,000 companies may be priced out of the health insurance market in 2007--forced to drop benefits altogether.
Small businesses are not the only ones affected by rising costs. High insurance premiums are also having an impact on large companies. They could see double-digit increases in their health-care costs, as shown in the Towers Perrin's Health Care Cost Survey released in October of last year. That would make the fourth year in a row they have had to endure these increases.
Medical insurance premiums are rising so quickly that employers providing insurance are facing little choice but to pass these costs on to their employees. In a worst-case scenario, employees would be responsible for 50 percent of their health-care costs and up to 100 percent of their family coverage. Can employees afford to take over these costs? The real median U.S. household income is only $44,389, according to the Census Bureau. At this income level typically, families are living paycheck to paycheck and are closely watching their spending.
Employees then opt out of health insurance because they often can't afford the rising premiums. Roughly 46 million people in the United States do not have health insurance, again going by Census Bureau figures. Don't be mislead into thinking the working uninsured are mostly young and healthy individuals. An increasing number of Americans age 50 and older also do not have health-care coverage.
The time is right for mini-med plans. A recent study by Aflac found that nearly half of all business owners believe that they can't attract and retain quality employees without offering competitive health benefits. That realization, coupled with the consumer appeal of mini-meds' cost-controlled price, explains why more carriers--Symetra and, more recently, Aetna and Cigna, for example--have jumped on the mini-med bandwagon.
BETTER BENEFITS, LONG-TERM EMPLOYEES
Kevin Brown, an employee benefits planner for Laurel, Md.-based Professional Benefits Solutions, said mini-meds are a viable option for employers of all sizes who find themselves unable to afford major medical coverage due to rising costs. It is not a matter of saying that companies should abandon major medical insurance, but there is a segment of each company population that could benefit from these plans. The challenge is understanding the financial and insurance needs of employees.
These highly customizable plans include everything from doctor visits and prescription-drug coverage to accidental medical coverage, hospital stays and surgical procedures. Plus, these plans can include nurse hotlines, flexible coverage for spouse and children, and additional riders for dental, vision and critical illness.
Unlike many "off-the-shelf" medical plans, mini-meds can be tailored to meet a company's specific needs. Plans are custom designed to offer the most coverage for basic medical services, excluding rare illnesses or catastrophic injuries. The plans also give employees control over their medical options and access to medical coverage by taking advantage of PPO networks to reduce out-of-pocket costs.
Mini-med premiums typically range from $50 to $150 per month for single health-care coverage, which can be much more financially manageable for employees compared with $308, the 2006 average national monthly premium for employer-sponsored coverage, as calculated by America's Health Insurance Plans.
Mini-med plans give employees the ability to get out of the county hospitals, walk-in clinics and emergency rooms and back to the primary-care physician of their choice. They can now have the care that major medical plans offer, with options that meet their financial needs.
The Society for Human Resource Management estimated that it costs $3,500 to replace one $8-per-hour employee when all costs--recruiting, interviewing, hiring, training and reduced productivity--are considered. With full-time salaried employees, that number goes up even higher.
For companies large, medium and small, providing a mini-med plan offers an extra advantage when it comes to recruiting and retaining top talent, considering that other companies are dropping health-care coverage completely. Because quality employees are attracted to companies with health-care benefits, a limited-benefit plan can demonstrate the value a company places on its people and can be very attractive to job candidates.
THE DEAL IS IN THE DETAILS
Based on these benefits, companies are adding mini-med plans to their health insurance coverage and are seeing positive results. For example, large employers like Target Corp., International Paper, ConAgra Foods and Wendy's have added limited-benefit plans to their health-care offerings.
In total, about 20 percent of employers offer a limited-benefit medical plan, according to a 2005 survey conducted by the Kaiser Family Foundation and the Health Research & Educational Trust. That number is growing rapidly. The mini-med market is now the fastest growing segment in the health-care insurance industry.
To illustrate why, here's an example of one employer's experience: A regional manufacturing company found it was struggling with ever-increasing health-care costs. Over the past few years, it had continually received double-digit increases from its current carrier and had been forced to pass these increases on to its employees. In response, participation in the company's plan had been steadily decreasing. As participation declined, premiums for the remaining participants increased.
In conjunction with an insurance broker and a third-party administrator, this manufacturing company developed a plan that would provide employees an affordable mini-med option with the employer contributing 80 percent of the premium, which reduced the overall health-care costs. Participation levels rose to more than 85 percent for this company. Overall, the employees were much more satisfied with their benefits package, and the company is now covering a larger percentage of its employees with a program that fits their needs, at a cost the company can afford.
The employer also feels relief resulting from this newfound ability to provide for a larger percentage of employees.
There are many examples that show how a mini-med plan broadens benefits alternatives and lowers overall costs, while improving medical-care access and coverage. With all of the challenges an employer faces today, a mini-med plan can be a refreshingly smart solution to the top concern of rising health-care costs.
is founder, president and CEO of Century Healthcare, a third-party administrator that focuses on limited-benefit medical plans.
October 15, 2006
Copyright 2006© LRP Publications