The cost of employer-provided health insurance is rising so fast that at the present rate it will roughly double in four years.

Health insurance rates are soaring because the cost of health care is climbing for a variety of reasons:

Normal inflation

Individuals belief they have a right to the best health care money can buy.

Improved, more expensive technology

Fear of malpractice suits

Cost shifting from poor to better-off patients

More state-mandated health benefits

An aging population

Here are steps employers can take to ease the financial burden:

1. Increase deductibles. With this option the employee becomes the benefits consumer and thus responsible for a larger portion of his or her medical expenses.

This method is considered less "painful" than having employees paying a portion of their medical premiums. The effect is felt only if and when a claim occurs, while the payroll deduction for premiums happens with every paycheck.

2. Changing the co-insurance percentage and/or stop-loss level. These methods of lowering premiums result in the same type of cost-shifting as in option No. 1. The consumer is exposed to greater amounts of risk and therefore costs if and when a claim occurs. The employer reduces costs by paying lower premiums. These options should be reviewed independently to measure the impact of each.

If the stop-loss (the amount for which a covered employee or dependent is liable for expenses arising from a single claim) is increased to an extreme, then the catastrophic protection value of the plan is severely reduced, and the very reason for having medical insurance becomes questionable.

As an example, if the stop-loss limit is $1,000, then the co-payment percentage (the portion the insured pays on each claim) or 20 percent is applied to the first $5,000 or eligible expenses.

Beyond that point, the plan pays eligible expenses at 100 percent.

Similarly, if you consider changing the co-insurance percentage from 80/20 to 70/30, an extreme increase can likewise severely lessen the catastrophic protection value of the plan, and the rate lowering impact also diminishes.

In addition, 'split level' co-insurance plans are available. For example, such a plan might offer a co-insurance percentage of 70/30 for the first $2,500 in expenses, and then 80/20 for the next $2,500 and 100 percent thereafter. The resulting out-of-pocket maximum cost would be $1,250 per person per year.

3. Eliminating benefits. If you consider the fact that medical insurance is designed to cover the major expenses, with the small expenses best covered by the individual, then the elimination of some benefits offers a sensible alternative.

Some examples are to eliminate accident benefits payable at 100 percent, reduce benefits to the government-mandated minimums, and reduce the outpatient co-insurance percentages.

The results of these types of changes may have only a nominal impact on premiums but they may have a greater impact on the attitudes of both you and your employees.

4. Changing insurance companies. When this option is considered as a means of reducing medical insurance premiums, a number of questions should be considered.

Will the new insurance company accept all of the people currently insured?

Will the new insurance company's pre-existing limitations have a negative impact on those members currently insured?

How different is the plan from your current plan, and how will your members react to a change?

What is the new insurance company's claim payment history and timing? The most dramatic results in curbing health insurance costs have been achieved by employers that have incorporated incentives into their benefit plans to encourage employees to become smarter, more cost-conscious healthcare consumers.

Make sure your employees know that health insurance benefits are not "free."

Encourage them to stay healthy and use healthcare services when necessary.

The article provided by Mass Marketing Insurance Consultants.

Optional Takeout

'Medical insurance is designed to cover major expenses; elimination of some benefits offers a sensible alternative.'