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Sunday, February 20, 2005

So Your Company's Insurance Just Renewed...

This is the time of year that anyone in charge of HR dreads more than any other; time to renew group medical and other benefits. This year the trend in medical coverage seems to be an 8 - 14% increase in cost, while prescription drugs continue their meteoric rise at around 20%. Why do HR heads hate this process? Because of lack of control, lack of options, and the surety that both their employer and employees will be disappointed to downright outraged over the outcome. What makes for increased costs? Why do your premiums, co-pays, and deductibles continue to increase? Well, gentle reader, read on...

The formula for insurance costs is simple: premiums = plan design x utilization + administrative fees. The plan design is what benefits you get from your plan. Some plans allow you to pay $25 one time and the rest is free, while another may require a $2,000 deductible. The richer the plan, the greater the expense. The second component in the equation is utilization, or how often people use their plan. This is usually determined by two factors: the age of the workforce and the presence or absence of a deductible. The older you are, the more you go to the doctor and thus the more you use your plan. Also, older employees tend to have serious and therefore more expensive health conditions more often than younger employees. A deductible, which must be paid first before insurance kicks in, is a deterrent to utilization in healthier employees. Administrative fees, the last component, are typically the cost of processing claims, paying brokers, and the profit margin for the insurance carrier. It's your employer's job to negotiate the best outcome for this component.

So what can you, as an employee, do about increasing health costs. Sadly, not much in the short-run. Your premiums are a function of the plan design x utilization of the employee group in which you're lumped + the administrative fees of the carrier your employer has chosen. Not much you can do but swallow the increased cost. Long-term, however, there's much you can do. Everyone in your household should have a physical annually, and sexually active females should have a well-woman exam each year as well. Women with first generation history of breast or ovarian cancer should have their first mammograms at 30, even though you'll have to fight to get it (the conventional wisdom of some groups is to start at age 40). My wife has a first-generation history and received life-saving detection and surgery at 32. Work out, walk, lose weight, stay healthy. This decreases your utilization and thus your immediate health expenses, and helps lower the claims experience of your employment group. Until a national solution is found, this is the best advise to be found. That and, whatever you do, don't blame your HR guy.

3 comments:

jon said...

I was looking at your posts about cancer symptom and found a good article about the same cancer symptom info too...

God luck with it : )

St Louis Cardinals BUFF said...

www.screentrade.co.uk insurance brokers

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