[Cover Story] Rx For PCOs

We used to pay it all. But as we have gone through time with significant increases, what we have done is modify everything."

Although this statement on health-care coverage was made by Phil Clegg, president of Clegg’s Termite and Pest Control, Durham, N.C., a similar comment could have been voiced by representatives of almost any company in the pest management industry. According to a 2003 PCT survey on health-care costs, 73 percent of respondents saw these costs rise by more than 10 percent in the previous two years.

Clegg’s continues to provide full health coverage for its employees, but it has seen a 20 to 25 percent increase in costs each year, Clegg said. Like many companies, Clegg has managed the increase by sharing the expense with employees: raising deductibles, including prescription and doctor-visit co-pays, and increasing the employee co-insurance percentage.

COST MANAGEMENT OPTIONS. Although he may not realize it, Clegg has applied a curative tonic for cost increases, as prescribed by Michael Weisburger, president of Weisburger Insurance Brokerage, a full-service insurance provider to the pest and green industries. To reduce costs, Weisburger said, employers can make changes in two key areas: insurance variables and employee contributions.

When choosing insurance coverage, an employer should review each of the variables and make choices for coverage based on the best fit for his company and/or employees. Work with your insurance agent and/or compare plans to explore different combinations and resulting costs. "It’s truly a balancing act in terms of your employees’ expectations and your budget," Weisburger said.

Variables to consider include:

• Deductibles — the amount the employee pays out-of-pocket before insurance takes over. This can also vary with each type of insurance provided.

• Co-insurance — the percentage of cost the employee pays for covered treatments after the deductible is met. For example, in an 80/20 plan, the insurance covers 80 percent of the cost, the employee pays 20 percent.

• Co-pays — an amount paid by the user for certain services. For example, most HMO/PPO plans include a base co-pay for network doctor visits.

• Prescription drugs — implementing co-pays and/or tiered payment in which the employee pays higher rates on name brand drugs than on generics

• Limit — the maximum amount of coverage for a single incident, procedure or person; and/or the maximum amount an employee is expected to pay for the same.

• Included vs. excluded procedures — the actual treatment areas covered or not covered by the plan, such as mental health, chiropractics, dental, cosmetic surgeries, inpatient/outpatient treatment, etc.

Modifying any — or all — of these variables can decrease or increase the premium for the plan.

The second area in which employers can manage finances are the costs and amounts paid by the company vs. those paid by the employee.

"How much do you have your employees contribute to their own health insurance coverage?" Weisburger asks. Some companies opt to provide complete employee coverage, but require contributions for spouse and family; others will limit employer coverage, but provide options for employee contributions for group insurance rates in areas such as dental, vision and mental health.

Such options can actually benefit employees by giving them choices in the way that their health care dollars are spent, he explained. If an employee’s spouse has coverage through his/her place of work, your employee can opt out of this expense. Offering a voluntary program in dental or vision can save costs for the employer, while still providing a group rate for employees who select this coverage.

When reviewing health insurance options, as well as other benefits, a company should also consider employee morale. Rose Pest Solutions’ health coverage includes employee contributions, but "over the years, we took one step that did not decrease our costs," said president of the Troy, Mich.-based company, Russ Ives. In the past, the company provided employee health insurance, but did not cover the family. This was changed to include family, on an equal percentage basis. "We felt that for recruiting good, solid, long-term prospects, it made sense to share premiums on a percentage basis," Ives explained. "That was an investment for us, but I think it helped us significantly."

EMPLOYEE CONTRIBUTIONS. However, requiring employees to contribute, at least in part, to their health-care plan can also help manage costs. Not only does it reduce company overhead, Ives said, "it also says to everyone in the company that you have a role in managing health-care costs."

Ives has found that the most rapidly increasing cost associated with health care today is the cost of prescriptions. To counter the rise, prescriptions represent a key area in which Rose advocates employee management. "One way of doing that is to set up co-pays or deductibles that encourage the use of generics," he said. In Rose’s prescription plan, employees pay a higher co-pay for name brand or formulary drugs than for generics. While all drugs are not available in generic formula, the plan encourages participants to at least inquire about the alternatives, he explained.

COMPARISON SHOPPING. Although opinions vary on the value of negotiating with your provider and the advisability of changing plans to reduce costs, it is generally agreed that it is wise to regularly review your plan and options and do some comparison shopping.

Clegg’s puts out a request for bids to several companies each year. Even if the company decides not to change plans, Clegg said, the comparison shopping provides a basis for negotiation with their current provider. It’s not an easy task. In fact, he said, "It’s a big hassle every year!" But Clegg feels it is important to ensure that his employees are getting the best coverage at the best price.

Rose also checks its options annually, but has some assistance with the legwork. "We have an agency benefits adviser that works with us, not just on our health care, but on our disability and life insurance plans," Ives said. The adviser provides information on trends in the industry, average cost increases and practices being employed by other companies.

Ives advises that companies start early to review their plan. "Our experience has been that health-care organizations tend to delay as much as possible in sharing information about premiums or committing to premiums," he said. Because "you can’t turn around and change your health-care provider on a dime," this puts your company at a disadvantage, particularly if you have not been shopping and don’t know the alternatives. "Don’t let your health-care provider limit your options," Ives advises.

While Weisburger agrees that companies should stay informed on current insurance rates and options, he does not believe it is always beneficial to change providers for better rates. Every time you change plans, you risk making changes about which employees may not be so happy, he said. "Employees like continuity, they like to know their doctors are approved." If the plan is changed year to year, you may force people to choose new doctors — or pay higher rates to keep their doctors — which can affect morale, productivity and employee retention. Weisburger speaks from personal experience. "Having continuity of providers is important — more important than I realized when I considered changing my plan," he said.

SMALL BUSINESS OPTIONS. Because insurance rates are based on a loss ratio, small companies have a distinct disadvantage. As Jeff Bacot, marketing director for the Texas Health Care Purchasing Alliance (THCPA), explains it: Say a company has five employees, and one of these has high-blood pressure. Because the company is covered as a group, that risk is spread across each of the five employees, significantly increasing their rates. Now say the company joins a group health plan, Bacot adds. This means the risk can be spread across perhaps 50 people instead of only five, and the percent of increase — thereby the premiums — per person becomes substantially lower.

It is exactly this option that THCPA offers to small Texas businesses. This year the Texas Pest Control Association joined with THCPA to offer group health insurance to its small business members. THCPA is a private non-profit purchasing cooperative whose mission is to "partner with our members to obtain the benefits of economy and improved coverages for their employees which occur through increased purchasing power and economies for larger groups of employees." In addition to helping companies pool together for better health benefits, the association works to educate its members and, Bacot said, "make sure employers are aware of all the products that are out there."

Although THCPA works only with companies in the state of Texas, similar health care purchasing coalitions exist in many states, and Association Health Plan legislation is currently under consideration which would allow small businesses to band together through trade and professional associations for group health-care packages. (See www.sba.gov for more information and resources in your state.)

Health Savings Accounts (HSAs) can also be a good option for small businesses, Bacot said, and one for which the association is beginning to see more and more requests. HSAs are tax-free savings accounts which can be used to pay allowable medical expenses. The HSA is set up as part of a high-deductible health-care plan. Premiums are significantly lower because of the high deductibles, and the savings account is used to pay the deductible and other medical expenses on a tax-free basis.

Because the money put into an HSA is completely employee owned, rolls from year to year and can be used for retirement if not spent on medical costs, it provides a valuable option for many companies. "HSAs are used a lot when employers have young employees who don’t want to participate in a medical plan," Bacot said. Young workers often feel they don’t yet need a plan, so HSAs offer an affordable health program along with a savings account. (To view this table, CLICK HERE.)

Even with older workers, opting for higher deductibles rather than higher premiums can be advantageous, because employees are paying for services which they use rather than being charged a high rate across the board "just in case." By adding the tax-free HSA to the program, employees can save 10 to 35 percent on out-of-pocket expenses.

EDUCATION AND COMMUNICATION. Health-care usage can be a contradictory proposition. The more a plan is used, the higher the costs can go. On the other hand, companies don’t want employees to neglect health-care issues, ones that can result in more complex health issues — resulting in even higher costs. A company also wants its employees to know the benefits it is providing, Ives said, explaining that you don’t want to be paying for a benefit that is not being used or that employees don’t even realize exists.

To keep its employees informed on the company’s programs and healthy living, Rose distributes information such as educational pieces from their provider, sample leaflets from the benefit consultants and employee newsletters. The pieces are sent with the payroll checks so they are seen, not just by the employee, but the family as well. "Communication is important to help people manage their affairs, let them know what you are doing, and encourage loyalty," Ives said. The more broadly you can get that information disbursed to those covered, the better it is for the company, the employee, and the family.

Such communication can help not only reduce costs for employers and employees but also contribute to the overall health of America. According to a press release from the U.S. Department of Health and Human Services, "Disease prevention and health promotion constitute our largest opportunity to improve America’s health." Disease prevention includes a wide variety of activities such as immunizations and seatbelt use. Health promotion consists of behavior choices, such as not smoking or using illegal drugs, eating right and being physically active "that can help give us longer, healthier, happier lives."

The release discusses a recent study that estimated causes of premature deaths in America (deaths before age 65). According to the estimate, the largest determinant — 40 percent — of premature death is unhealthy behavior patterns.

This, and the decrease in insurance options for employers over the last five to 10 years, has led to a paradigm shift, Weisburger said. "The old paradigm was that employees are entitled to health insurance for themselves and their family, whether (the employers) pay for all or part of that expense. If they become sick they wouldn’t have to pay, the insurance company would.

"But those days are gone," Weisburger said. Today, people are expected to take more responsibility for their own health and wellness, not only through increased co-pays, deductibles and rates, but through increased focus on healthy behaviors. Insurance companies encourage participation in wellness programs — even providing incentives for participants to take advantage of wellness benefits. Today, he said, "it’s about wellness, it’s not about sickness."