Open Enrollment: Strategies to Reduce Costs of Health Insurance Coverage

With proposed healthcare reform not likely to affect this year’s open enrollment season, business owners must make difficult decisions about their current employee healthcare plans. “Small businesses are really challenged with offering group health insurance because of increasing costs,” says Sam Gibbs, a senior vice president with Mountain View, California-based ehealthinsurance.com.

For the companies that are able to offer this important benefit to their employees, the pros say it’s important to reign in expenses and educate workers.  Here are expert-suggested steps for employers and employees to help reduce their financial burdens.

For Employers:

Verify dependents. Weeding out ineligible dependents can help businesses cut out unnecessary costs, says Kadedra Kiner, director of product strategy for BenefitFocus, a healthcare benefits software provider in Charleston, South Carolina.

Kiner says the process is called dependent eligibility verification, and it can be as simple as asking married employees to produce marriage certificates if they seek coverage for their spouses.  If the employee adds a dependent child, she suggests asking them to produce a birth certificate.  “You’re making sure only the right people are covered under your group plan,” Kiner says.

Communicate cost-reduction options with employees. If your business is facing an unaffordable increase in premiums, call a meeting with your employees and learn what features of the plan they value most and what they can cut, suggests Gibbs. “Find out what benefits are most important to your employees, the ‘have-to-haves’” he says.  “If they had a $15 co-pay before, maybe they can get by with a $35 co-pay if the other option is to not have insurance at all.”

Employees may communicate that a “have-to-have” is supplemental insurance, which includes disability, cancer, and accident coverage.  “Supplemental benefits can be offered with

employer-paid, partial employer-paid, or employee-paid coverage options,” says Brenda Roberts, an Allstate insurance agent in Chicago.  The last option, employee-paid coverage, could minimize business costs while at least giving employees the chance to get the coverage. Roberts notes that when employers do pay for some of the costs of coverage, they could receive tax benefits for the business expense.

Encourage wellness programs and initiatives. “Focus on healthcare as opposed to sick care,” says Kiner. “Do little things like sponsor walking events or offer fruit [in the breakroom]. Help your employees live a healthier life, and it can keep costs down,” says Kiner.

For Employees:

Read the fine print. Workers have a responsibility to understand their choices during open enrollment, so they can minimize their own healthcare costs, says Gibbs. “If employees miss the deadline for open enrollment, their company might re-enroll them with the same coverage.  But costs are likely to be higher next year, so employees could see their premiums go up significantly, even though they didn’t make any changes,” he says.

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Shop around. Gibbs adds that it may also be a good idea for employees to look for an individual plan, even if they qualify for group coverage.  “This year, a lot of employees are finding that it’s less expensive to go out and just get a [private] plan for their spouse and kids, for example, instead of getting that coverage from their employer’s plan,” he says. An added benefit of a private plan is that you don’t automatically lose coverage if you lose your job. (See sidebar for alternatives for the unemployed).

Unemployed? Look into COBRA and COBRA alternatives. The Recovery Act provides for a 65% subsidy of health insurance premiums for people who are in between jobs and eligible for COBRA coverage. That subsidy is due to expire at the end of 2009, though legislation has been introduced to extend it into 2010.

Whether the subsidy is extended or not, some people who are in between jobs may find that other insurance alternatives are better suited for their situation, Kiner says.  For people who are looking for a COBRA alternative, she suggests contacting the provider of their former employer’s group plan. “Talk first to the people that you and your family trusted for health coverage before,” she says.

If you’re unable to obtain a private health insurance plan, contact your state department of insurance to see if you or your dependents qualify for state coverage insurance.  These plans are typically for low-income individuals, or people who have difficulty obtaining insurance because of pre-existing conditions.