In today's employee benefit marketplace it is becoming increasingly difficult to get more for your employee benefit dollars. Many factors have contributed to the continual rising cost of group and individual health insurance coverage. As our population ages, the demand for medical services increases. New treatments and technology come with a hefty price tag, and we all want access to the very best health care available. Advertising is pushing the demand for prescription drugs to record levels. More Americans are on some type of prescription drug than ever before. Due to Medicare cutbacks, providers are shifting part of the costs of treating some patients to other consumers; primarily individuals covered by private insurance. Federal and state regulations, especially in the small group marketplace, have put tremendous pressure on rates and the ability of insurance carriers to maintain expectable profit margins.

What can you do in the face of constant double-digit annual rate hikes? Moving your employee benefit program each year in order to save a few dollars is a vicious cycle that usually leaves both the employer and the employees frustrated each year, especially when benefits begin to erode and costs continue to climb.

Two common ways for employers to save money are to implement a tax-savings strategy and “Cost Shifting” with the Employees. A very popular tax-favored strategy for plans where employees contribute part of the cost for themselves and their dependants is implementing a Section 125 Premium Only Plan (POP).  By instituting a tax-favored Section 125 POP plan, you will provide your employees a raise in take-home pay and reduce your overall employment tax liability. These plans can usually be set up with little or no cost to the employer and allows for the portion of the benefits premium paid by the employee to be payroll deducted on a pre-tax basis.

Employers can save money on premiums by “Cost Shifting”.  Employers offer a variety of plans to each employee, determining a “base plan” and pay a percentage of that particular plan. When employees have the ability to control the level of benefits they desire along with the amount of premium they are willing to spend, young and healthy employees often choose higher deductible, lower cost plans. Employees who are high users of benefits tend to pay more out of their own pocket (“buy up”) to more expensive, higher benefit plans. At renewal, when premiums are raised, the employer has the option to change the “base” plan or the percentage of contribution. This allows the employer to really budget and control his or her employee benefit cost. The employee has the choice to pay the additional cost for the health insurance or choose an optional plan design, which will defray the increased cost. Employees appreciate having a choice of plans and the ability to make that decision for themselves. The downside may occur if the employer chooses a very inexpensive, low benefit “base plan” or contributes too small a percentage of the premium. When this occurs, many employees will opt out of the group plan, which may make the group ineligible for insurance coverage due to missing participation requirements. 

Health maintenance organizations (HMOs) and preferred provider organizations (PPOs) are both types of managed health-care systems. If you are fortunate enough to have a choice between HMO and PPO coverage, you will need to take some time to evaluate the coverage offered by each and determine which one best suit the needs of yourself and your family.

Several important distinctions include:

• HMO members must choose a primary care physician (PCP) from among the HMO member physicians. The PCP provides general medical care and must be consulted before you can see a specialist, who must also be part of the HMO. PPO members do not choose a primary care physician and can refer themselves to specialists.
• HMOs typically provide no coverage for care received from non-network physicians (with exceptions for emergency care while traveling, etc.). PPO members are not required to stay within the PPO network, but there is usually a strong financial incentive to do so. For example, the PPO may reimburse 90 percent of costs for care received within the network, but only 70 percent of allowable costs for non-network care.
• HMOs typically do not set deductibles that must be met before insurance benefits begin (e.g., $250 or $500). Instead, HMO members often pay a nominal co-payment (e.g., $10 or $25) for care. In contrast, PPOs usually require members to meet a deductible (especially for hospitalization) and may have larger co-payments than HMOs.

So, which is better? Of course, there isn't one right answer; the best choice depends on your particular needs. For example, if you are considering an HMO, it's important to make sure that your physician is part of the HMO network (unless you are willing to see another physician). If not, a PPO might be a better choice, because you can still receive at least partial coverage regardless of network affiliation. You might also prefer a PPO if you have a medical condition that requires specialized care, because PPO members do not need a referral before seeing a specialist. However, if ongoing out-of-pocket costs are a major concern, an HMO is often a better choice, because there are no deductibles and co-payments are typically lower.  

COBRA is an extension of medical insurance benefits for terminated employees and their dependants following termination and/or other "Qualifying Events".  Cal-COBRA extends COBRA-like benefits (i.e. continuation of coverage) to employees and dependent spouses and children of firms of less than 20 employees. The difference between the two has to do with the differing responsibilities of the employer, where the federal Law applies to employer groups of 20+, and Cal-COBRA to smaller sized groups of 2-19 employees. Federal COBRA requires the employer to provide not only the initial Notice of COBRA Rights, but also the Election Notice and premium collection functions, whereas Cal-COBRA transfers the latter requirements to the Insurer.