Its renewal time at the ACME Widget Company.
ACME has a ‘typical’ health plan; i.e., a $2,000 deductible, 80/20 co-insurance and, office visit & prescription drug Co-Pays. Maximum Out of Pocket: $6,350. The premium for single coverage is increasing to $549. ($1,759./family).
Under consideration is an alternate option where the insurer would pay nothing until an individual met a $5,000 deductible ($10,000 /family). Gasp! No co-pays. This plan has a single monthly premium of $335. (family, $1,074.).
At ACME, employees pay for 50% of their coverage. If you’re someone listening to the roll out of this new option, what are you thinking? The premium savings would be nice but gosh, now I have to pay up front for doctor visits and prescriptions? Ouch!
Based on the mix of 37 covered employees, ACME’s premium would be $110,000 lower, too. So ACME has decided to set up a Health Reimbursement Arrangement (HRA) covering the first $2,500 of the deductible at 50%. If every man, woman & child in the group (57) collects the full $1,250 (unlikely), ACME would still be ahead $38,750.
Not sold yet? More next week.