Ask any benefits administrator what concerns them most and chances are that the rising cost of health coverage ranks high on their list. The percentage of employers offering health insurance to workers continues to fall, dropping to 60 percent in 2005, according to a survey by the Kaiser Family Foundation. Employers are not likely to see relief anytime soon, as health care costs are expected to keep rising -- by almost 10 percent in 2006.
In light of these challenges, some insurance companies began offering supplemental, limited benefit health policies to ease the burden for employers and help bridge the insurance gap. Such policies might offer relief from the excessive premium pricing and the inflationary pressure inherent in full coverage, major medical plans.
However, many employers harbor concerns about limited benefit health policies that often deter them from offering these benefits.
For one, employers worry that going with a limited benefit health policy will hurt their ability to recruit and retain high-quality workers. In addition, it can be difficult for some employers to manage benefits costs effectively. This cost-control issue is particularly troublesome for employers that rely on employees who work part-time, seasonal or variable hours.
Resolving these two employer concerns without undermining the positive aspects of limited benefit medical policies requires both innovation and a clear understanding of the problem. While most insurers continue to struggle with developing the right solution, a few limited benefit health policies, such as Select Benefits insurance coverage from Symetra Life Insurance Co., are responding effectively to the needs of employers.
For example, to help mitigate the recruiting and retention problem, there are policies that feature composite rate pricing options in addition to the conventional tiered rate structure.
A composite pricing technique actuarially averages the cost of multiple tiers associated with different coverage levels into a single rate. The result: One composite rate covers both the employee and all eligible dependents. Plus, the composite rate typically costs less than dependent coverage using conventional pricing.
From a recruiting and retention standpoint, employees may appreciate having one simple and easy-to-understand rate that includes family members. This also enables employers to promote their ability to provide dependent coverage premiums at the same rate as coverage for the single worker. Composite pricing further streamlines administration and payroll deductions for the employer, as the same rate can be applied to all employees. In addition, a limited benefit policy might give the employee and their family access to routine medical and preventative coverage at a reasonable cost. This can be an attractive employment incentive, especially if a competing employer is offering no coverage whatsoever, or using coverage that charges extra for dependent benefits.
In terms of cost control, there are now some limited benefit policies that give employers more options. For example, companies with employees who tend to work inconsistent, part-time or seasonal hours might want to consider a limited benefit plan with an hourly premium structure. From an expense management standpoint, this might be a useful alternative to limited benefits policies with conventional monthly premium structures.
These plans are priced based on a fixed amount per hour, rather than using a standard monthly (or weekly) amount. This enables businesses to budget on a cost-per-hour basis. As with wage rates in a payroll, the policy's hourly rates are fixed and premium accrues as the employee works. Some of these policies' coverage will even kick in after just an hour of service during the month. Importantly, the employee's benefits increase as the employee works more hours. The hourly plan thus provides both an employee incentive and a way to reward those employees who work the most hours.
In addition, there are other aspects to some limited benefit policies that make the coverage particularly functional. This includes policies that waive medical component deductibles, eliminate medical underwriting at open enrollment, have no network requirements, and do not require preexisting coverage or coordination of benefits clauses.
By using some of these more innovative solutions, there are practical ways to provide health insurance through limited benefit policies. With the added flexibility that some limited benefit policies now offer, employers can actually utilize the benefits to boost recruiting and retention and get a better handle on expense control.
From the January 2006 issue of Benefits Selling Magazine • Subscribe!
