How do I determine how much employees should pay for insurance premium

[Guest Lori W]

In the near future I will have the employees at our company start making weekly/bi-weekly contributions for the Insurance premiums. The company has always picked up all of the premium cost for single & family coverage in the past. Where do I start in determining how much they should contribute? They have $10 OV copays & $150 annual deductibles. Also, how do I present this negative information?

[Guest rmg]

There are a few ways to go about determining what to charge. You don't say why you're going to have to start charging - is it b/c the er can no longer afford the premiums or has there been a change in management's philosphy about what they should pay for?

One reason ers offer benefits is to attract/retain ees. How much you charge should consider, among other things, what caliber ee you want to attract and what you can charge for their benefits in order to be competitive (in your industry &/or region &/or size of employer). How do you know what "competitive" is? Well, there are several surveys out there (Mercer, Wyatt, Hewitt, Chamber of Commerce among others) that will tell you how many ers charge premiums and of those that do:

* what the average premium ees pay for ee coverage (as a dollar and as a percent of premium)

* what the average premium ees pay for family coverage (as a dollar and as a percent of premium).

These surveys are broken out by employer size, location, industry. These surveys also have data on deductibles, coinsurance, and copayments. So, by accessing that data you can determine how your plan design stacks up against "average".

Once you know what's competitive, you can then determine what you think you should charge or, if you know you need to charge a certain amount, you can determine if it is significantly higher than "average" - and if it is, can you reduce it at all?

As for communicating the changes, that's never fun or easy. Put the most positive spin on it that you can. You have several positives - 1) you've been paying for it all, which fewer and fewer ers have been doing, especially considering the family premiums; 2) you've got relatively low deductibles and copayments. The reality is, health insurance costs are going up and the ees need to help pay for it not just through deductibles and copayments but also through a share in premiums.

Good luck.

[jeanine]

It might be helpful if you could tell us what type of business this is. Our last need for an increase was explained very well by showing how much money the institution spent on healthcare (we're self-funded), how much it spent in past years, and what it expected to spend in the future. We're all pretty intelligent people--we could see that the company spent much, much more than our current premiums or even the increased premium. It also wouldn't hurt to show how reasonable your plan is compared to other groups. One thing we did years ago, was switch from a flat rate Rx to a %charge. This meant the pharmacy had to show the retail charge. Most enrollees had no idea how expensive a benefit this was until then as they only ever paid $3.00 no matter what the drug. Tell them the truth. It might work.

[Greg Judd]

Originally posted by jeanine

Tell them the truth.  It might work.

Second that.

I'm starting to sound like a flack for Kaiser Family Foundation, but their annual Employer Health Benefits survey does a great job of providing info useful when addressing questions like this: Click here for links to the survey & its components (Acrobat documents).