Business Gets Ready for 2012 Health Insurance Hikes

Something new has been added to what we can count on in life, besides death and taxes, rising health insurance. The cost of going to the doctor is not a partisan issue, no matter who is in office, costs keep rising. This will hold true for 2012 as several factors transpire to see one of the highest rises in insurance costs the nation has ever seen.

According to a PwC Consulting report, 2012 medial costs are expected to rise 8.5% versus the 8% that was projected for 2011. After several years of rising costs to employers, what does this leave the business owner to do? A recent Bloomberg BusinessWeek article, as well as most of experts, think the employee is going to start taking more of the increased cost.

Rich Sprute, with Montgomery & Graham in Portland, Oregon, states that, “Employees should see a small increase to help offset the larger increase the employer is facing. Most employers are continuing to restructure benefits to help offset these increases. The most common approach employers are taking is to assume a small portion of the risk of the plan they purchase and still offer a strong benefit to the employees.”

With many business owners not wanting to devalue the benefit package or the drug coverage offered; the PwC feels an increase in employee deductibles might be where the usual worker will see the hit. According to the firm, companies with deductibles of $1,000 or greater will see more companies following suit, to the tune of 28% . Similarly, plans without deductible will see an increase to the $400 and greater category by a 54% increase.

As a business owner you only have a few choices for the upcoming insurance year:

• Pay more for the insurance you offer your employees.

• Devalue your current plan to a lower one that fits what you currently pay.

• Increase the deductible your employee pays, increasing the out-of-pocket expense before insurance kicks in.

There are currently two ways to handle an increased deductible, simply raise it or enter into a High Deductible Health Plan (HDHP). Inside the HDHP plans, there are generally two directions a company can go; first, the employee can fund a flexible spending account (FSA) or “cafeteria plan” or second, the company can enter a Health Reimbursement Arrangement (HRA). The big difference is the FSA being funded by the employee; yet may have government restrictions of use in place. While the HRA is funded by the company which places rules on how the funds can be administered. For example, the company could fund the difference between the old and new deductible after co-pay and co-insurance. In another example, the funds could be used for co-pay, it’s a rather customizable system.

Some people will find using this type of health care simple, while others will find it difficult. Many just do not want their company dictating what they can and can’t go to the doctor for. Blogger Linsey Knerl offers some points as to why she “hearts” her HDHP; accountability for her own healthcare and the luxury of negotiated pricing through the insurance carrier who will not pay the bill submitted but will invoice their “negotiated” price.

The key to any of these programs is how you, as a business owner, educate your employee on it’s use. Any new policy and benefit change will come with a need to work as a team to navigate. Combine teamwork with wellness plans/incentives and most employees might not notice a difference. What is clear is the fact that change is upon us, has been with us, and the employee landscape as it pertains to benefits is shaping before us.