Eleven Ways to Reduce Your Cost of Health Care Without an Act of Congress
by Jeffrey Koch, CIC
1. Buy drugs wisely
Spending on drugs has increased 13 percent per year, with pricing accounting for only 8.4 percent annually. Drugs account for 11 percent of total health-care spending.
What you can do
- Use generics wherever possible to reduce the cost of getting well
- If you are on a maintenance drug, then buy in quantity by mail or on-line. You can fill new prescriptions or transfer existing prescriptions from your current pharmacy to a certified online pharmacy. You can find a certified online pharmacy by checking the National Association of Boards of Pharmacy and VIPPS, which list certified pharmacies. Look under accreditation programs on their home page. Once you've chosen a pharmacy, you can go to their Web site and set up a free, private and secure account. They will also explain how to transfer your prescription to them and verify the new price of your medications. Some prescription benefit plans will provide this information to you in advance.
2. Be healthy, encourage healthy behavior in others
Inactivity is directly related to obesity, and there is a direct correlation between how much TV we watch as a nation and how obese we have become. So if we get off the couch, we will feel better, go to the doctor less, miss less work, and be more productive.
According to the state of Missouri, the cost of health care associated with inactivity in 2000 was $76 billion. In 1987, 11.7 percent of the Medicare population was obese, a number that grew to 22.5 percent of Medicare enrollees by 2002. Spending on medical care for obese Medicare patients was 9.4 percent of the federal government program's budget in 1987, but jumped to 24.8 percent by 2002, according to the analysis. Lifetime medical costs for the "big five" (heart disease, stroke, high cholesterol, high blood pressure and diabetes) are $10,000 higher for a moderately obese person.
What you can do to encourage healthy behavior?
- Eat less, burn more calories
- Lose weight; encourage it in others
- Losing 10 percent of your body weight can result in lifetime savings of between $2,200 and $5,300
- Make a healthy lifestyle part of your company's culture
- Lead by example
- Make fruit and water as accessible to employees as candy bars and colas
- Consider holding meetings/discussions while walking the perimeter of your business' parking lot
Help control the cost of getting healthy by:
Encouraging community flu shots
3. Be better informed: Manage your risk by managing your health
Watch out for the "big five": diabetes, obesity, asthma, high cholesterol and high blood pressure. They drive as much as 75 percent of the costs of health care, according to Dr. David W. Fleming, acting director of the Centers for Disease Control and Prevention. These diseases can be managed, and the degree to which you and your employees manage them early will determine how expensive the total cost will be.
What you can do
- Know your family history, and be proactive in managing your risks. Your health-insurance carrier should have a Web site and a management program for the "big five."
- Visit other sites with information on managing these diseases and other medical conditions, such as:
4. Take more control of your care
Take as much control of your health care as you do of your car--and watch the associated costs as carefully as you would watch the costs of gas and repairs on your car.
What you can do:
- Get a physical each year
- Screen for likely problems based on your history
- Ambulatory care centers vs. emergency rooms: Know where they are and what their hours are, and try to use the emergency room as the last resort, not the first
- Prevent problems: avoid sunburn, lift with your knees, buckle-up, take safety home with you
- Avoid unnecessary tests: ask whether it is truly necessary. Make sure your doctor is not practicing defensive medicine.
- Check your medical bills and ask questions
- More and more information is becoming public about health care pricing, so shop whenever possible
5. Use short-term medical insurance
Short-term insurance is usually a good choice when you are transitioning between group plans (or for an employee moving from one organization to another). It is generally cheaper than COBRA coverage and can provide continuation of credible coverage for the next group plan. However, be aware of its limitations as you make the choice between it and COBRA coverage, as it may not cover pre-existing conditions, may not be available for more than one year, and is often not renewable.
What you can do
If your insurance agent does not have a source for short-term medical insurance and you need to shop for it, NFIB members can call NFIB's short term medical insurance resource at (888) 488-6266. Coverage is available in all states except Hawaii, Massachusetts, New Jersey, North Carolina, Rhode Island and Vermont.
6. Be a smart consumer
It pays to shop. You need to know what you're buying and whether you are getting the best value for your money.
If you weren't paying for it, wouldn't you be driving a more expensive car? People spend their own money differently than they spend someone else's. If you are providing health care to employees, make sure they have skin in the game. Milton Friedman, a Nobel-peace prize-winning economist in the 20th Century, said that when you spend your own money on yourself, your concern for cost and quality is high. The more employees have at stake in the buying process, the better the process will work.
What you can do
- Use your spouse's company health plan
- Choose your insurance carefully agent carefully, asking the following questions:
- Who does your agent represent?
- How many carriers do they use?
- Will they help your employees make choices?
- What other products can they offer?
- Do they understand health savings accounts and health reimbursement arrangements?
- Do they encourage the use of them?
- Read your policy carefully
- Shop your premium at renewal
- Ask your carrier how they review bills and ask how they look for fraud
- Move to consumer driven health-care plans like health savings account-eligible insurance
- Know the cost of the features you choose
- Explore list-bill insurance coverage. Group coverage is sometimes more expensive than individual coverage. Get more information on list bill as an option.
For more information on how individual health plans can provide an affordable alternative to expensive group plans, call a licensed representative at (888) 488-6266.
7. If you keep a traditional health-insurance plan, manage the cost
Traditional health-insurance plans (as opposed to plans that use a health savings account or health reimbursement arrangement) are not as effective for controlling the cost of health care. Remember Dr. Friedman's analysis. If your employees are spending someone else's money on themselves, they will not be as concerned about controlling the costs as they would be if they were spending their own money.
Consider the following to help manage costs:
- Increase co-pays
- If you use a traditional health-care plan, increasing co-pays can lower your cost of premium and reduce the utilization of services. However, make sure that the plan you choose will provide access to preventive care to help hold down the long-term cost of health care.
- Increase deductibles
- Increasing the deductible your employees pay will result in lower premium costs for you and possibly reduced premium cost-sharing for your employees. Many employers find that they need to either raise deductibles and increase cost sharing, or drop health insurance all together.
8. Take advantage of Section 105
Section 105 plans allow you to deduct 100 percent of unreimbursed medical expenses and health-insurance premiums without having to itemize your health care spending (which requires spending 7.5 percent of your income on unreimbursed medical expenses).
If you operate a sole-proprietorship or a partnership, you must be married and your spouse must be employed by and providing meaningful services to your company. C and S corporations do not have the same requirements, but if you have an S corporation, you must utilize a W2 and your wages must be subject to Social Security taxes. It is also necessary to pay for all of the family expenses through your company.
We recommend you use a third-party administrator to implement these plans to help you with the paperwork process.
What you can do
Many companies like TASC and Coredocuments.com offer turnkey programs that include a plan document, an adoption agreement, a required summary plan description, an annual documentation of benefits paid and third-party adjudication of claims. Some also offer audit guarantees.
9. Understand voluntary benefits
It is important to understand what voluntary benefits are, and it is just as important to understand what they are not. Voluntary benefits are NOT health insurance. There are some vendors who try to disguise this. If an ad says "you can not be turned down," rest assured it is not health insurance, which you will need it if you become seriously ill.
What they are
Voluntary benefits can supplement a current health-insurance offering or provide valuable protection where no other benefit exists. Because they are not health insurance, they are more affordable than health insurance. They include coverages like supplemental medical indemnity insurance, accident insurance, cancer insurance, critical-illness insurance, disability insurance, term life, whole life, and universal life insurance and annuities.
The coverages can be purchased individually based on the needs or desires of an individual employee, his or her spouse, and family members, providing greater financial security for the employee and his or her family. They can provide affordable and portable coverage that is precisely defined by the policy that the employee chooses to purchase. Not all employees need to participate or purchase the same coverages.
If the employer offers them in conjunction with a Section 125 plan, employers may be able to save money on payroll taxes. (This information should not be construed as legal or tax advice. Consult your tax advisor on specific points of interest.)
What you can do
Allow your employees to select additional benefits. NFIB's voluntary benefits resource for members is AIG American General Life and Health, and can be reached at (800) 922-6185. Have your NFIB member ID available. Only NFIB members have access to the skilled nursing care benefit, and there is also a critical illness and emergency treatment rider. Also available to NFIB members is a pharmacy discount card associated with the voluntary benefits program. Representatives can set up meetings at which your individual employees choose the components of the program they feel they need.
You may also request information by e-mailing voluntarybenefits@aigag.com and providing the following information: NFIB member ID, contact name, business name, business address, city, state, ZIP code and phone number.
10. Use flexible spending accounts
Flexible spending accounts let you set aside pre-tax dollars for qualified unreimbursed health care expenses. An FSA can reduce your payroll taxes, and employees have control how they spend the money. FSAs provide funds to use on items not covered by health insurance, co-pays, or health expenses not covered because the deductible has not yet been reached or because they fall within the uninsured percentage of a covered expense.
It is important to understand that unlike health savings accounts, FSAs are "use it or lose it" accounts, so employees have an incentive to spend all of the money they place in their accounts. If you are self-employed, you are not eligible for an FSA.
What you can do
Plan ahead when using an FSA and make sure that you do not put aside more dollars than you can reasonably expect to spend. If you have money to spend at the end of the year, you can buy medical supplies for your home such as over-the-counter medicines, vitamins and supplements. For a list of qualified expenses, see IRS Publication 502, but remember that the Treasury Department rules now allow you to include over-the-counter medicines as an FSA-eligible expense.
11. Move to a consumer-driven health plan
Consumer-driven plans like health savings account-eligible health insurance encourage better behavior by using the consumer as the watchdog on expenses. Concern for quality care at a good price is high, and as information about cost and quality becomes more available, consumers will make better choices using these plans.
Consumer-driven health plans have been proven to reduce the rate of insurance-cost increases. They provide tax savings, and unused money in health savings accounts (as well as the interest they earn) roll over from year to year. At retirement, these plans can be used to pay for medical expenses on a tax-free basis or can be used as would other retirement plan funds.
Higher deductibles on health savings account-eligible health insurance provide discounts of 20 to 60 percent. The plans are available for both groups and individuals or as list-billed insurance plans.
We recommend adopting plans with no copays and no coinsurance so that once the deductible has been reached, 100 percent of the health-care expenses are paid by the insurance company, which limits individual responsibility for a catastrophic health event and provides a known limit of spending in any year.
Do the math:
| John: Traditional insurance plan | Susan: Health savings account-compliant plan | ||
| Annual premium | $3,600 | Annual premium | $2,080 |
| $500 deductible, 80/20 sharing $20 copays for doctors and prescriptions |
No shared expense after $2,500 deductible; 100 percent coverage including doctors and prescriptions after deductible is met |
Assumes 42 percent | |
| If they each see a doctor for a $150 visit, and purchase $150 in prescriptions: | |||
| John's cost for $150 visit and $150 of prescriptions | $40 (Two $20 copays) |
Susan's cost | $300 |
| John's total out-of-pocket, including annual premium |
$3,640 | Susan's total out-of-pocket, including annual premium |
$2,380 |
| Susan is $1,260 ahead of John, with his $20 copays. | |||
Plus the $300 Susan paid for the doctor visit and prescription was from a pre-tax health savings account, and all the money left that year in her health savings account rolls over to next year, earns interest tax-free, and is available for medical expenses should she need it next year.
Learn more about how high-deductible plans and HSAs can help with your health care
What you can do
Ask your insurance agent to move you to a health savings account-eligible insurance plan. For a no-obligation quote on an eligible plan, or for answers to how these plans work, NFIB members can call NFIB's health savings account-eligible insurance plan resource at (888) 488-6266.
Please consult your accountant, insurance agent, and tax preparer before implementing any of these insurance or tax-advantaged programs.
