February 4, 2014

A Little Bit More On Reducing Health Insurance Costs

By Paul Bieber

Enough already.  No, please, just one more column on traditional health insurance.  We’ll hold off discussing the Affordable Care Act for another season. Read just this last one and you may save on your health insurance.  Who is ‘you?’  Well, it is both the employer and the employee, so everyone should read this column.  Whew, got that long intro out of the way. Let’s get down to the details.

This savings program is called “The Employee Buy-Out;” you pay your employees not to take your insurance.   Here are the numbers.  Let’s assume you are paying $300 a month for a single plan and $800 a month for a family plan.  And let’s say that the employees pay 25 percent of the cost, leaving you with a net cost of $225 for single and $600 for a family plan. 

Some employees, and I have found this to be about 25 to 30 percent in most companies, have access to another insurance plan.  Most commonly a spouse is working, or they have a military or civil service retirement plan, or can go on their parents’ plan.  In a married couple, people will often put their unpaid or partially paid medical bills into the spouse’s plan for reimbursement, so they are happy having two plans.  And folks on the single plan also do this when they have another plan.

So, your plan is this.  You will pay family plan people who drop your insurance $200 a month, saving you $400 a month, and saving the employee $400 as well (the $200 you pay plus the $200 paid for their share of the insurance).  The employee comes out $4,800 ahead (less some taxes on the $200 you pay).  They may lose their double-dip savings by putting in the balance of their bills to the other’s insurance company, but in almost every case, the employee will come out ahead.  In your family plan, offer $100 per month to change from a family plan to a single plan, and the numbers come out well for both the employee and the employer.

For the single plan employee, offer $75 to drop the insurance.

Everyone comes out ahead.  So who loses?  It is the other insurance company who is picking up more bills.  And you want to offer this before your employee’s spouse offers this.  This program requires some solid explaining to your employees and good planning on your part for the numbers.  One caveat:  Do not let your employees drop your insurance if they don’t have alternate coverages.  Some folks will drop the insurance just to get your buy-out money and then don’t have coverage.  Make sure you see the documentation that they have alternate coverage before you drop them from your plan.  And also, check with your broker when an employee who drops your insurance can come back on the plan.  It may only be once a year.  Be sure to tell your employees this date.

Still confused?  Call me at 603/242-3521 for a further explanation.  This consultation is a courtesy provided to all USGlass readers.