What other employers are doing

Employers are beginning to find the cost of EACH benefit as to the annual cost per employee (EE) and per hour cost per (EE). This cost is then added to their compensation to equal a total compensation amount per employee. With this new information employers are finding some alarming things.

Employers are surveying employees with the goal of finding the amount of wasted dollars spent on medical coverage. Employers may find employees and their dependents are double covered. These wasted dollars are sometimes enough to pay for the medical rate increase for that year and future years. When you eliminate wasted dollars from double coverage you will receive the savings year after year It is unlike a one-year savings when you switch a vendor only to find, the new vendor will play catch-up the next year.

The newest buzzword in medical benefit design is "Define Contribution". The medical profession is borrowing the term "Define Contribution" from the retirement plan professional. This generic term means the employer defines their contribution (cost) to the medical plan(s). There are many variations of a Define Contribution design.

Take for example, the employer will pay $3,000 per employee for medical coverage. The employer has at least two medical plans that employees are able to choose from. The two plans will be called Standard Plan and Preferred Plan. The Standard Plan will be the lower cost plan that all employees are able to afford with the help of the $3,000 employer contribution. This can very well be a major medical deductible plan or Gatekeeper Restricted H.M.O. stripped down plan. The preferred plan has a higher level of benefits and/or has open access where referals are not necessary from a primary care doctor to see a specialist. The Preferred Plans' cost will exceed the $3,000 employer match and definitely cost more than the Standard Plan. The employer has more cost control because the cost is fixed between the two plans.

If your employee participation in the medical plan(s), is 85% or greater, this may be a viable option in its purest form. If employee participation is 65% to 84% it may be durable, but most likely it will cost the employer more than what they are spending now. If participation is below 65%, it could work if your current medical plan is rich in benefits with low employee cost. As you can see, this is a very specialized analysis. Dattilo Consulting Inc. provides this specialized analysis.