Health Plan Cost Increases

[Guest tracygil]

We are getting ready for open enrollment and have received our final numbers from our vendors. We have several different medical plans due to having facilities in various states. The cost of one plan is going up 12% (available in one state), another is going up 4% (available in several states) and the last is going down 1% (available in one state). In our planning meeting, management wants to do an across the board cost increase of 8%to all medical plans instead of increasing the cost to employees based on the cost increase of the plan in which they are enrolled. Another idea was to still do an across the board increase to all medical plans but at a lower percentage and make up the difference by raising the employee cost of the dental and vision plans. Neither of these ideas sound right to me. What are your thoughts?

[KIP KRAUS]

I’m not sure what you mean when you say, ”Neither of these ideas sounds right to me”. Regardless of what the renewal rates for the individual plans are the employer surely has the right to increase the plan cost to employees across the board. An employee cost increase does not necessarily have to be related to the renewal increase.

[Guest tracygil]

I wasn't saying that the employer doesn't have the right to increase the employee's premium. But it seemed strange to me that a 12% increase of the cost a medical plan offered in one state only could affect the increase to employee's premiums in another state where that plan is not even offered or that 12% increase in medical premiums could increase the employee's dental premium. This is obviously not my area of expertise and I just wanted get a better understanding. Thanks!

[GBurns]

It seems like fairly standard cost allocation.

If the employees in the 12% states have to bear the full 12% you run the risk of many dropping coverage because it is too expensive. The employer might then have increased labor costs from increased absenteeism and increased rates next time from the insurer because of the smaller group.

What happens if next year the states gets reversed??

Spreading it across the entire population seems fairest in the long run. However, I am not saying that 8% is fair, that is for your company to calculate bearing in mind the number of participants in each state.

[Guest tracygil]

Thanks so much! I feel much better about the issue now.