Get A Grip on Health Care Costs Washington DC

If there is one good thing you can say about health care today, it is that the level of cost increase between 2002 and 2005 shrunk by 36%. The increase between 2005 and 2006 is projected to be about 8.8%. Compared to other years, that's not bad.

Yet, despite this lower increase, the discussion of health care costs seems to be a never-ending debate. The annual increases, types of coverage, employee contributions and types of plans all add up to one big ongoing headache.

Many CEOs in this industry have to decide what to offer in the way of health care and, in many cases may not be able to cover the cost of providing it. Of course, union shops cover health care costs for union employees. But the rest of you must decide whether to offer any coverage at all, or just basic coverage with employee contributions paying about 40% of the premiums.

There doesn't seem to be a solution in sight that will make health care affordable for all Americans. New treatment options, diagnostic procedures and drugs keep us from getting sick, resulting in longer life spans, but also increasing the cost of care. Add to that the aging baby boomers and you can see how these new services and options might come into play more often in 2006 than they would in 1980.

The Associated Builders and Contractors, Inc. (ABC) has been promoting Small Business Health Plans (SBHPs) for years without success. SBHPs sound like a good idea, but the insurance companies aren't very keen on the concept. Even where such plans have been offered through associations, in many cases, insurance companies terminated the plans because of the high costs to manage them. Until something is worked out, this program will stay on the back burner.

Steps to lower your costs

So what can a small business do to manage its health care expense? Probably a lot. Education and training are the key components of any company health care program.

There are individuals who go to the doctor for every little ache and pain, pay the $10 or $20 co-pay and assume that's all it costs. Or they go to the pharmacy and dish out $20 for a $150 bottle of pills, with the impression it is basically free. No wonder they run to the doctor and emergency room — it doesn't cost anything!

But we all know better. The total cost of health care is covered through premiums, which are becoming a major burden to both employers and employees. So what can you do to improve your situation?

No matter what, most companies need to take action to monitor and control health care expenses. Some steps to consider include:

1. Audit your policy and terms to make sure you understand how the policy works.
2. Make sure all employees understand the policy terms, and have them sign off annually on the coverage of dependents. You would be surprised how many dependents maintain coverage after they no longer qualify.
3. Educate employees on how to effectively and efficiently use the policy. Make employees painfully aware that health care services are not free, and in order to keep their premium contributions down, they must keep costs in line. There are many ways to get health care advice without going to the doctor. For example, many companies provide a phone list to access advice on common ailments.
4. Provide health care seminars and services to keep employees healthy. Stop smoking and weight loss contests could help cut costs.
5. Give your employees some "skin in the game". High-deductible health plans, such as Health Reimbursement Arrangements (HRA) and Health Savings Accounts (HSA) do this, while making employees aware of costs and alternative sources for services and information.

Benefits of high-deductible plans

The last option seems to be the best way to encourage people to make more efficient use of their health plan. High-deductible plans require employees to pay 100% of claims after a certain point, rather than just co-pays. Ultimately, they may not have more out of pocket expense, but the thought of paying $150 for that bottle of pills may encourage them to ask if a generic version is available. Paying the doctor $250 for a 15-minute appointment because of a cold could deter them from making unnecessary visits.

In addition, employers can let employees carry over portions of the deductible that they don't use to protect them at a time when they have a major need for services. HSA accounts even let employees take away what they don't use, just like a 401K plan. Coupling it with a 125 Plan to reduce their tax bills makes this an attractive plan to offer if you want to get control of costs.

Those of you still unable to secure coverage due to the size of your company could try to buy a plan or policy to cover catastrophic claims, keeping the burden of everyday costs with the employees.

There is no easy answer. However, looking at the HRA and HSA plans is a must. Educating employees is a must. Offering incentives for efficient use of premium dollars is a must. And making health care cost management a priority is most certainly a must.

Garry Bartecki is director of dealer/distributor services at BDO Seidman, LLP of Chicago, as well as a consultant to the AED. He has also worked as an independent CPA and consultant to equipment dealers. He can be reached at (312) 616-4677 or gbartecki@bdo.com.