Benefit Cost Containment

Making the most of your benefit plan without breaking the bank.

Although beneficial (pun intended), group insurance is a cost to your business and escalating expenses may tempt you to cancel your benefits plan. Fear not, there are options available to help reduce the cost of premiums while still protecting your greatest asset - your employees.

Some widely used cost-reduction strategies include:

• Deductibles

• Coinsurance

• Annual Maximums

• Eligibility Requirements

Deductibles

A deductible is a specified amount that the employee must pay before the insurance company will pay a claim. Deductibles can be annual, or per service, and be applied to one or more facets of your benefit plan, such as prescription drugs, paramedical services, or dental. The larger the deductible, the more the cost is contained but the more your employees are out of pocket.

Common annual deductibles are $25/Single, and $50/family, and common per-service deductibles are $5 per prescription.

Coinsurance

Coinsurance requires that the employee shares a percentage of the claim cost. For example, a coinsurance of 90% would mean that 90% of the expense is reimbursed, while the employee is responsible for the remaining 10%. Coinsurance typically runs between 80-100%, and like deductibles, coinsurance can have different amounts that apply to different facets of your benefit plan. You can choose to cover 100% for prescription drugs, 80% for paramedical services, and 90% for dental. Or you can have one percentage across the board - it's up to you!

Coinsurance under 100% makes the employee more aware of the costs of their claims, and as such they are typically more reserved and price-savvy with their medical expenses.

Due to the infrequent but high financial burden of out-of-country medical costs, it is recommended to reimburse these claims 100%.

Annual Maximums

Annual maximums mean that after an employee has claimed a certain dollar amount in covered expenses, the employee will be responsible for any further costs incurred. Maximum dollar amounts can be placed on specific facets of your benefit plan, and are typically seen on paramedical services, dental, and medical supplies.

Keep in mind - putting maximums on elements such as prescription drugs and hospital expenses will mean that those in most need of the benefit plan, or if a catastrophic event occurs, your employee could be left with a very heavy financial burden.

Eligibility

This defines who is eligible to be part of your group benefit plan. This is typically set by months of continuous employment at your organization and/or a minimum number of weekly hours (ex: 3 months of continuous employment with at least 20 hours per week). Companies with very low employee turnover may opt to have a 1 month (or shorter) waiting period, whereas companies with very high turnover could choose to have a waiting period of 6-12 months before an employee is eligible for benefits.

Remember, balance is the key. You can still offer a great group benefit plan to your employees while being mindful of your overhead.