expect big increases in your employee
health insurance premiums of
late. Employer-sponsored health insurance
premiums increased an average of 11.2
percent in 2004, and this was the fourth
consecutive year of double-digit growth,
according to the recent Annual Employer
Health Benefits Survey released by the
Kaiser Family Foundation.
That's about five times the rate of inflation
nationally, and probably significantly
higher than the price increases your company
has imposed on its products and services
in the same time frame.
The reasons for these increases are not
mysterious. The largest share of the ongoing
increases track to increased utilization
of advanced medical technologies new
diagnostic and preventive screenings, and
other high-tech therapies and medical
hardware the majority of which are
delivered at hospital on an inpatient or outpatient
basis.
Prescription drugs also continue to play a
major role in the rising cost of health care,
owing to the higher prices of new formulations,
the wider application of combination
therapies and greater consumer demand
for, and need of, medications in all areas of
prevention and treatment. About the only
area that has seen relative stability is physician
costs.
Such increases, when they are part of the
costs of running your business, are naturally
cause for concern. It only makes
sense that employers who want to continue
offering their employees access to quality
health care become more knowledgeable
about how well their money is being
spent by the health care carrier they
choose.
For example, did you know that virtually
all carriers in Florida spend roughly the
same percentage of your premium dollars
on medical claims which works out to a
medical loss ratio of 76 percent to 80 percent?
They also spend about the same percentage,
10 percent to 12 percent, on
administering your plan (processing
claims, providing customer service functions,
covering fixed costs).
And most of the carriers factor in a 2 percent
profit margin. The balance of your
premium dollars go to the commissions,
which carriers pay to the independent
health insurance brokers who act as consultants.
Brokers are, of course, a critical element
in matching clients with carriers. Most
small business employers don't have the
time or staff to determine the best package
of benefits for their group, shop the market
for bids and compare product offerings
carefully.
They depend on their broker to explore
the different options, give them objective
recommendations on the best choices and
complete their applications. And brokers'
services may often continue after enrollment.
It's extremely valuable for employers to
better understand where their premium
dollars go. Don't hesitate to ask questions
to fully recognize why one health plan may
be preferred over another.
Employers can exercise some control
over their costs by finding a health benefits
company that provides the best value for
their company's premium dollars. The way
in which you shop a health plan can impact
the price.
It's the same as if your travel agent had a
great deal for you air, car, hotel and
meals included. You tell your agent to book
it. Coincidently, your neighbors just
booked that same trip for $1,000 less
through their travel agent.
One agent shopped for the best price, the
other agent arranged the trip through his or
her vendor of choice. Whether it's a family
vacation, buying a car or choosing a health
benefits plan, how you shop can impact
your cost.
So why are health care premiums different?
Take a closer look.
PETER JOSEPH is senior vice president for commercial sales
for VISTA, a health benefits company headquartered in South
Florida with more than 330,000 members. VISTA, through its
affiliated companies, Vista Healthplan Inc., Vista Healthplan of South Florida Inc. and Vista Insurance
Plan Inc., offers a choice of health benefit plans, including health maintenance organization (HMO), preferred
provider organization (PPO) and pointof-service (POS). Reach Joseph at (954) 986-6255 or through VISTA's
Web site, www.vistahealthplan.com.