Reduce premiums, provide coverage Featured

7:00pm EDT November 24, 2006

Health care costs continue to rise. According to the Kaiser Family Foundation (KFF) — a nonprofit organization that provides facts and analysis on major health care issues facing the nation — health care premiums have risen between 50 percent and 60 percent over the past five years. Comparatively, in this same period, inflation rose 15 percent to 16 percent and wages 16 percent to 18 percent. In fact, the average cost of health care insurance for a family of four is now $11,000 per year.

Yet there are methods to help curb the costs, according to Gary Stroud, Ph.D., program chair of the human resources management major at Franklin University.

“While health care premiums for your company may be above or below the average, there are a number of ways that you can reduce those premiums and still provide coverage for your employees,” Stroud says. “The good news is, these cutbacks will actually boost morale in the workplace and allow you to keep good employees.”

Smart Business talked to Stroud to gain more insight on what a company can do to keep health care premiums at manageable levels.

What concerns should a company address when reviewing health care costs?

It is essential to make certain that those in charge of human resources are fully trained for their function.

The HR staff needs to be aware of current laws, rules and regulations pertaining to employee benefits and to fully understand and apply them. They must stay current on federal and state laws and, in some cases, local laws and ordinances. As a company, your role is to provide this staff with the resources for adequate training or to hire a human resources manager who has the expertise and background to be abreast of the newest information. Training needs to be ongoing, as skills fall out of date, laws change, and rules and regulations are continually evolving.

To achieve optimum ongoing knowledge development, it is also important that all of your managers become involved in the respective associations and organizations that cater to their profession. For example, your key HR people should be actively involved in the Human Resource Association of Central Ohio and the Society of Human Resource Management, and managers should participate in the American Management Society. Those with benefits oversight should involve themselves in Worldatwork, a compensation and benefit organization.

What are some specific ways to reduce health care premiums?

Conduct an audit of what health care-related events have occurred in the past, determine what is needed by the majority of the employees, and set your priorities accordingly. Look at each area of coverage and provide substantial coverage for the catastrophic things that cannot be foreseen, and allocate responsibility to employees for the more common events that can be expected.

A good example is to avoid coverage of benefits for which everyone would be required to pay, but only a few will use, such as hospitalization. Why should your employees or the company pay a premium for overnight hospital stays when it is unlikely that the majority of your employees will need such a benefit? Talk with your agent about a policy that excludes coverage for the first one or two nights stay and then kicks in for the third and succeeding nights. Perhaps include a provision that if the hospital stay is more than seven nights, all nights would be covered.

Drug plans are another area that can be quite costly, yet with proper prioritization can meet the needs of most of your employees while at the same time cutting premium costs.

What about coverage that is mandated by law?

While you must comply with the mandates, you must also be aware of what areas are not mandated and how those can be used to cut costs. This is why it is vital that people reviewing benefits plans are current on all of the changing laws and regulations.

What else?

Communication is essential. Convey clearly to all employees what you are doing to meet coverage requirements and still keep costs down. Provide information on how employees can save for the future and establish incentives for them to plan ahead. Tactfully let them know that it cannot be expected of the company or government to supply all their personal needs.

Also, when recruiting members of the work force, be mindful of the job skills needed and hire only those with the appropriate qualifications. If you do not possess effective recruiting skills or don’t have the time to devote to this key area, consider either hiring a recruiting expert or company to provide this function.

GARY STROUD, Ph.D., is program chair of the human resources management major at Franklin University in Columbus. Reach him at or (614) 947-6165.