Issues to consider
when devising benefits plan

By Evelyn Lane
Guest Columnist

Expenditures for employee health-care benefits are soaring, and companies are searching for more cost-effective plans that keep expenses in line while still satisfying their workers’ needs.

Consider these numbers: Companies currently spend an average $5,000 per person per year on health care — and the cost has been increasing at the rate of 20 percent per year.

At that rate, by 2008, employers could expect to spend $12,400 per employee per year on health-care benefits. In comparison, a 1,000-employee company that can hold health-care cost increases to just 7 percent per year will save approximately $5.4 million by 2008.

These potential savings are enticing companies to make a wide range of changes to employee benefits plans — all aimed at sharing more of the cost with employees. For example, some plans include different co-pays for hospital visits (emergency, prescription and general care), point-of-service plans and HMOs, among others.

Two of the most popular methods for lowering employers’ benefits costs are to raise employee deductibles and lower coverage limits. These measures may be unpopular with the work force, yet many companies find they have no choice but to share the burden of higher health costs with their employees.

Some companies are evaluating whether their health plans should provide first-dollar coverage — where the insurer pays its portion of the bill first, then the employee pays the remainder. Many employers are reconsidering that structure, which became common in the 1980s.

In many cases, they are moving away from first-dollar coverage and replacing it with a high-deductible plan that provides employees with protection from catastrophic losses, but requires employees to pay up-front costs before the plan benefit begins.

With heightened demands from clients, employee benefits providers have begun to offer a variety of options. The newest trend is Consumer Driven Plans, where the employee shops for health care using a pre-determined amount of money provided by the company. These plans usually carry very high deductibles, and many employees may find it difficult to navigate the health-care market and may run out of money before the coverage period ends.

While these plans are becoming more popular, very few companies offer Consumer Driven Healthcare Plans as an employee’s only option. Most provide the plan as an alternative to the core health-care option.

So what can you do to reduce costs at your company? Start by setting up a meeting with your benefits provider and your financial services provider. Ask for options you can offer to your employees.

A trusted adviser who has a broad view of your finances can review your current insurance coverage for potential cost savings and inefficiencies.

You’ll need to do some homework before that meeting.

• Set a realistic budget. Be clear about the dollars you have allocated to spend on employee benefits in the coming year.
• Know what is most important to your employees. If the majority of your work force has young children, they may prefer a different type of coverage than a work force made up of older employees whose children are grown.
• Set expectations. Employees are more likely to accept new benefits options positively if you’ve explained the business rationale behind them.

Your adviser can help you choose a plan that balances costs of coverage with real-world economic and employee concerns.

When you are examining a benefits package, it can pay to consider other benefits you can provide for employees that might offset some of their increased health care costs.

For example, your bank may offer free or discounted financial services to your employees when they use the bank’s direct-deposit program. This cost-saving option may help the bitter pill of increased health-care costs go down a little easier for your employees — and it demonstrates you’re looking out for their total financial health.

Evelyn Lane is a business banking manager with Wells Fargo in Everett. She can be reached at 425-252-1620 or by e-mail to laneevel@wellsfargo.com.