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How to Save on Your Health Insurance
How Did We Get Here?
1970-1980 Indemnity Plans
• Deductibles and Co-insurance
• True Fringe Benefit
• Single Coverage $35.00
• Family Coverage $105.00
1980-1990 HMO’s
• Co-pays• In-network Coverage Only• Managed Care
1994 NJ Small Group Reform
• Standard Plans
• Guaranteed Issue
• No Pre-existing Conditions
• Dozens of Carriers
• Single Coverage $200.00
• Family Coverage $500.00
2007 Limited Market
• 7 Carriers
• Wide Array of Plans
• High Deductible Health Plans
• Single Coverage $400.00
• Family Coverage $1,200.00
Now That We Are Here, How Do We Save?
Easiest Way to Save
• Employees Pay More of the Cost• Higher Payroll Deductions
or• Higher Cost When Utilized
Raising Cost of Utilization to Lower Overall Premium
Office Visit Co-pays
• Co-pays available up to $50
• Split co-pays– $15/$30– $20/$40– $30/$50
• Every $10 increase in co-pay is worth approximately an 8-10% decrease in premium
Prescription Options
• Increase Co-pays
• Three Tiered Co-pays
• Deductibles and Co-insurance
• Going from two tiered prescription co-pays to three tiered prescription co-pays can reduce costs 5-6%
Ways to Lower Costs Without Reducing Benefits
Self-Insurance and the Rule of 80/20
• Self-insurance means taking some risk away from the insurance company and putting it on the employer.
• This is done routinely on the property and casualty side through the use of higher deductibles.
• We can use the same concept with health insurance.
There are three main areas where we can use the self-insurance concept:
• Hospital Co-pays
• Deductibles In-network
• High Deductible Health Plans
The Rule of 80/20
• 80% of claims come from 20% of covered participants
• 70% of all covered participants have less than $1,000 of claims in a year
Daily Hospital Co-pays
• Range from $125 to $750 per day or per admission
• Save premium dollars of approximately 8% and self-insure the hospital co-pay
Self Insure Hospital Co-pays
Example:Group of 15 singles and 15 familiesMonthly premium without hospital co-pay:
$30,315Monthly premium with $300 hospital co-pay:
$27,930Monthly Savings $2,385Annual Savings $28,620
Break even point 95 Hospital Days
In-Network Deductibles
• These deductibles apply only to hospital and facility charges and outpatient surgery
• Generally the deductible is from $1,000 to $2,500
Self-Insure the DeductibleExample:Group of 15 singles and 15 familiesMonthly premium without in-network deductible
$30,315Monthly premium with $1,500 in-network
deductible $17,775Monthly Savings $12,540Annual Savings $150,480
Maximum exposure of deductibles $67,500Net minimum savings to employer $82,980
High Deductible Health Plans
• These plans must have a minimum deductible of $1,100 per single and $2,200 per family.
• More common deductibles are $1,500 or $2,500 per single and $3,000 or $5,000 per family.
• All expenses, except preventive care, are subject to the deductible.
• These plans are eligible to be paired with Health Savings Accounts (HSA).
High Deductible Health Plans and Health Reimbursement Accounts
• Instead of contributing to a HSA for each employee, which becomes the employee’s money, self-insure the deductible through use of an employer funded Health Reimbursement Account (HRA).
• The HRA is only funded to the extent the deductibles are used. The employer pays as the expenses are incurred. As a result, the employer’s liability is reduced.
Example:Group of 15 singles and 15 familiesMonthly premium $30 co-pay POS plan
$30,315Monthly premium $2,500 HDHP
$13,445Monthly Savings $16,870Annual Savings $202,440
Maximum Exposure of Deductibles $112,500Net Minimum Savings to Employer $89,940
Samuel L. StettlerPO Box 937
Flemington, NJ 08822
908-806-3001 - phone908-806-3113 – fax
www.thestettlergroup.com
