Looking for ways to reduce insurance costs? Don't just cut benefits. Marcus Newman, an employee benefits consultant with GCG Financial in Bannockburn, Illinois, offers these tips for controlling costs while still giving great benefits:
Increase your deductible and self-insure the difference. If, for example, you have a plan with a $500 deductible, increase it to $1,000 to reap a reduction in premiums, then reimburse employees after the $500 mark. Analyze your claims pattern to make sure this approach will work for you.
Reward longevity by setting up a vesting schedule for the company's premium portion. Start by paying 25 percent of an individual's coverage, and increase that by 10 percent for each year of service. If you already pay a higher portion, grandfather in current employees and apply this policy to new hires.
Set up a Medical Savings Account (MSA) with a high deductible. "Often the premium reduction is so great that the employer can fund the MSA to a certain extent with the savings," Newman says. MSAs also give employees incentive to keep their health costs under control. For more information, go to www.irs.gov/prod/forms_pubs/pubs/p96901.htm.
Whatever you do when it comes to health insurance, Newman cautions, be sure your program meets all the requirements of the Employee Retirement Income Security Act (ERISA).
Jacquelyn Lynn is a freelance business writer in Orlando, Florida.
- GCG Financial
(847) 457-3058, www.gcgonline.com