Health Insurance Renewal – Part 2

There are millions of healthcare plans renewing in January 2023.  About 60 days before this, employers will be notified of the new premiums for their benefit plan. In this series we will explore ideas employers can use to mitigate these increases.

Cost Sharing

For employers with 50 or more employees, the maximum employee contribution towards health insurance has been reduced to 9.12% of income from 9.6%.  In previous years, the contribution was based on the cost of single coverage in the lowest priced plan being offered. Because the employer offered coverage, dependents were precluded from receiving tax credits if they purchased coverage from an Exchange.  This “glitch” has been corrected for 2023 and if employer coverage is unaffordable, dependents can now qualify for tax credits when coverage is purchased in the Exchange.

Here are some cost sharing strategies to consider:

• Charge a higher percentage of premiums for dependents than employees
• Base employee contributions on the lowest costing plan
• If there is more than one plan base contributions on the lowest costing plan and let employees pay the additional cost for other plans
• Offer two plans and make sure the differential in contributions is enough to make employees think about their choice
• If you have low-income employees see if they might qualify for state subsidized programs. In some cases, they may be able to get free coverage or qualify for Medicaid

Funding the Plan

“Fully insured” (prospective premium) is the traditional, fully insured financing arrangement. An insurance company determines a premium rate per covered person and, in return, pays benefits and provides other services related to the plan (for example, actuarial, legal communication, and underwriting services). The rates are determined before the beginning of the plan year, hence, the term prospective premium. These rates may be determined based on the employer’s own claim experience, the insurer’s “book of business,” or a combination of the two. Traditional funding, which is uses extensively in the small business market.

Traditional self-funding is defined as when an employer pays for their own medical claims directly, while a third-party administrator (TPA) administers the health plan by processing the claims, issuing ID cards, handling customer questions and performing other tasks. Companies with fewer than 250 employees can self-fund but will typically purchase stop-loss insurance. Stop-loss insurance limits the amount of claims expenses.  These programs can be offered bundled together through one carrier or unbundled and purchased separately – TPA, Stop/Loss Insurance and Rented Network.  The latter gives the employer the ability to keep the network but move the insurance it rate get too high or change the administrator is the service doesn’t meet quality standards

While self-insured employee health plans were traditionally deemed a large company benefit, in the last few years several carriers have packaged programs designed for small employers with as few as two employees (some states have high minimums, i.e. New York only allows these plans for employers with over 100 employees) Small employee programs make it easy for these companies by keeping premiums level (instead of varying with the amount of claims submitted each month) and offering end of the year refunds if premiums paid included more claims than were incurred.  There is also a feature to pay for runout claims when the plan is terminated. Typical savings in the first year can be as high as 20% and renewals are often more competitive than ACA plans. If level funded plans are available in your location, they can be a valuable long-

Some of the advantages of self-funding are:

• Administrative costs are reduced
• Paying for actual claims instead of estimated claims
• Complying with only federal mandates
• Stop/Loss Insurance to protect from large claims
• Same plan across states
• Claims information showing where claims are from

Putting it all Together

Remember the following for putting together a great benefit program

• Match benefits to EE needs
• Offer more than one plan if you have a diverse population
• See if HRAs or HSAs are a good fit
• Use incentives to encourage healthy behaviors/lifestyles
• Pay a higher % for employees than dependents
• Base company contributions on the lowest costing plan
• Offer voluntary benefits to help employees with out-of-pocket expenses

Patrice S Goldfarb has been an employee benefits consultant for over 20 years. She has worked within the large corporate markets, as well as small to mid-sized businesses, non-profit organizations and associations.  She also specializes in long-term care insurance and assists people transitioning to Medicare.

Read Part One of this series here.

Patti can be reached at (201) 255-6239 or pgoldfarb@ebagroup.net