Tuesday, May 12, 2009

Taking the Bite out of Rising Healthcare Costs

What do CFOs worry about when the credit crunch is not their main focus of attention?

In its most recent CFO survey by Bank of America, 67 percent of CFOs are concerned about rising healthcare costs. It is little wonder with healthcare costs expected to grow at an annual average rate of 6.7 percent between now and 2017.

In a survey conducted late last year by CFO Research Services, more than 40 percent of CFOs said they intend to reduce their company’s contribution to benefits in 2009.

Just how will they accomplish this? Will it be through a reduction of benefits, a transfer of costs to employees or a complete rethinking of the very nature of health plans?

To find out how companies might accomplish this, I spoke with Kelly Moore of Moore Benefits. Her company provides employee benefits consulting, brokerage, communication and administration for businesses with up to 200 employees, nationwide.

Here are three ideas Kelly mentioned that companies may use to save money on healthcare costs while remaining competitive in their benefit offerings.

First, companies might consider using a smaller network of HMO providers. In many cases, the more restrictive network allows for the same employee co-pay levels with a much lower premium cost. The savings can be substantial and in the range of 15% - 20%. The downside is that some employees may not have access to their provider as this smaller network will exclude the highest cost providers.

Second, many employers have realized a 20 to 30 percent reduction in premiums by replacing Co-pay plans with high deductible plans in combination with health savings accounts (HSAs). This is a good idea for employers who currently offer co-pay plans with relatively low out-of-pocket costs. The reason these plans have been slow to be adopted is the extra layer of paperwork in establishing, funding and filing claims from the HSA. Every carrier offers these types of plans and people from both extremes (high and low utilizers) can benefit from the savings.

Third, the most common way employers cut healthcare costs is a transfer of costs by increasing co-pays and deductibles. Moore agrees with CFO Magazine that employers may be able to make small changes to healthcare plans to minimize the increase in employee costs.

As lenders drill down on a borrower’s expenses and cash flow, healthcare costs will continue to draw their scrutiny. If you need assistance in getting a better handle on your company’s healthcare costs, give Kelly Moore a call at (949)872-2380.

Need help finding the right lender or telling your story the right way for your California business? Read "Matchmaking for Business Loans" and give me a call!

Tags : healthcare costs , chief financial officers , employee benefits , health savings accounts , HSA

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