Richard Bartholomew is CEO of America Fork's A Plus Benefits, which provides employment-related services to small businesses. He has some advice for companies and employees dealing with benefits issues.
What trends are you seeing in terms of changes companies are making in employee benefits packages?
We've seen for several years firms whittling away at "first dollar" or low-risk benefits. These include increases in deductible requirements, out-of-pocket maximum exposure, co-pays for office visits and prescriptions. Additionally, more employers are passing a larger portion or the entire amount of the premium increases onto employees.
Describe insurance plans or options that should be avoided.
No one is excited about seeing benefits reduced, but I believe far more devastating to employees is a reduction in the employers' financial contribution to the monthly premium. A few employers have seen the recent economic challenges as an excuse to not only pass on a larger portion of increases to employees, but also to reduce what the employer has historically contributed. The premium deductions from paychecks have immediate and definite impacts on household budgets. This is one of the reasons I am an advocate of providing employees choices whenever possible, to be able to decide what works best for their household and their budget.
What areas of health insurance can be cut back with the least negative impacts?
It depends on the individual circumstances of an employee and covered dependents. A change may have no impact other than lower premiums to one family, while the same changes result in hundreds of dollars of additional expenses for another. Medical benefits depend on the insurance principle of spreading and shifting risk. When benefits are reduced, the risk is retained by the individual as an alternative to paying the market price for being able to transfer the risk. More employers are exploring the benefit of using Health Reimbursement Accounts (HRAs) as an alternative to avoid shifting the risk back to the employee. By using an HRA, the employer retains some of the lower, or noncatastrophic, risk, resulting in lower premium costs. For example, the overall benefit plan may apply an additional $500 in a deductible requirement in order to reduce the benefit cost, and the employer establishes an HRA designed to reimburse employees in the event they are exposed to the extra deductible burden.
What other benefits do Health Savings Accounts provide?
I am hesitant to advocate employers making this type of coverage the only one available to their employees. As so often is the case, one size rarely fits all. Federal guidelines dictate the structure of a qualifying high-deductible plan. Among the advantages is the opportunity for the individual to establish a savings account that he or she can fund with pretax dollars and spend tax-free on out-of-pocket medical expenses. They can be an excellent addition to other retirement planning tools, and they leave the individual in control. This tool is most attractive when the employer is willing to use some or all of the premium savings to help fund the employees' HSA.
Dawn House Richard Bartholomew, executive