Health insurance costs are expected to rise 16 percent in 2003, but employers may be able to offset all or part of this increase by adjusting their overall benefits packages.
Here are five ways employers can make their benefits packages more cost-effective without diminishing benefits or significantly increasing plan administration costs.
* Enable employees to pay for benefits with pre-tax dollars. Deducting employee-paid benefits from pre-tax income saves the employer and employee money — the employer avoids paying matching Social Security, Medicare and federal unemployment taxes on the value of the benefit, and employees reduce their taxable income.
* Offer voluntary benefits. Offering voluntary benefits lets employees pay for benefits they want, often with pre-tax income, through payroll deduction without increasing the employer’s costs. Voluntary benefits include vision and dental coverage, short- and long-term disability, supplemental and dependent life coverage, long-term care insurance and even automobile insurance.
* Switch to a health plan with a smaller network. Switching to a health care plan with a smaller provider network that still allows employees to go outside the network at a reduced reimbursement rate can cut an employer’s health insurance costs up to 10 percent. In an objective cost/benefit analysis, premium savings usually outweigh the perceived desirability of wider networks.
* Introduce consumer-directed health plans. National studies have shown that employees want to take a more active role in their health care choices. Consumer-directed health care plans combine a high-deductible health plan with an employer-funded account that employees use for out-of-pocket medical expenses.
The U. S. Treasury Department and IRS recently provided guidance establishing tax qualification and carry-forward provisions for these accounts. Balances can be carried over from one year to the next without tax consequences for employers or employees. Employees can use the accounts to cover substantiated medical expenses and accident and health insurance premiums for themselves, their spouse and dependents.
* Establish a wellness program. An employee wellness program offers on-site access to health services such as blood pressure monitoring, cholesterol screening, smoking cessation programs and nutrition counseling. The benefits to employers are improved employee morale, fewer sick days, reduced use of health care benefits and increased productivity.
A local hospital or physicians practice, chiropractor, fitness center or health food store often provides free or low-cost assistance in exchange for the opportunity to raise awareness of their products and services. Patricia A. Schultz is a lawyer with Eckert Seamans Cherin and Mellott. Reach her at www.escm.com.
