Some ways employers can manage rising healthcare costs in 2010 include offering voluntary benefits and high-deductible health plans paired with wellness programs. Conducting dependent eligibility audits and increasing cost transparency for employees can also help lower costs. Promoting generic drugs, prescription drug plan redesigns, on-site clinics and disease management programs are further innovative ways to save on benefits costs. Loss forecasting is an important first step for analyzing optimal insurance programs, though forecasts have limitations since future losses are uncertain.

1. STAFFING Q1 2010
AssuranceEdge
Helping Today’s Professionals Stay on Top of the Insurance Marketplace
Manage Your Benefits Costs in 2010
As healthcare costs climb, the amount your company
must pay for employee health benefits also increases.
Unfortunately, the trend of health benefit costs rising
faster than the rate of inflation is expected to continue.
Unpredictable and uncontrollable health insurance rate
increases are having a very serious financial impact on
most employers.
For years, employers have worked fiercely to absorb
increasing premium costs to avoid placing the burden
onto their employees. Unfortunately, many companies
have reached their breaking point and have come to the
realization that it’s necessary, just to stay afloat, to pass
a portion of the increased costs onward. In addition to
increasing employee contributions, employers are also making drastic plan design changes that may require greater
out-of-pocket spending when the medical services are utilized (increased coinsurance, deductibles or copayments).
Though the downtrodden economy still rears its ugly head, many companies are seeking ways to lower their
overall healthcare costs, while still offering employees a comprehensive benefits package. Below we’ve listed
some ways to manage benefit costs.
Innovative Ways to Save
1. Offer voluntary benefits as a way to help employees, even though your budget may be tight. Since group
rates are often less expensive than individual policy coverage, offering voluntary benefits may be just the
ticket for employees who want specialized coverage.
2. Offer a high-deductible health plan (HDHP) in conjunction with a wellness program. Pair incentives of the
program with the health plan through premium discounts.
3. Conduct a dependent eligibility audit. This can weed out ineligible dependents and could produce
significant savings.
4. Show your employees how much healthcare costs by providing information about what the true costs
of their benefits really are. Cost transparency can lead to employees making smarter, more economical
decisions about their health.
5. Encourage your employees to use generic medications versus brand name medications. Promoting the
$4 generic prescription program through Target and Wal-Mart is a great place to start.
6. Redesign your three-tier prescription plan to encourage lower-cost generic usage. You may also consider
not covering expensive “lifestyle-type” medications or possibly creating a fourth tier to your plan covering
them at an increased rate.
7. Promote low-cost health screenings, health fairs and on-site clinic care.
8. Inherit a top-down approach when promoting health and wellness. Upper management should be the
first to get health assessments and screenings to show employees how important preventative care is in
reducing overall costs.
9. Analyze carrier data to identify common chronic diseases or conditions
within your organization, and implement a disease management program
to educate employees, prevent their conditions from worsening, and
ensure that they are properly managing their conditions.
10. Routinely educate employees on smart consumerism strategies, the
importance of preventive care and the availability of low-cost medical or
prescription options in your area.

2. Q1 2010
Can you see into the future with
loss forecasting?
An essential first step in analyzing the most effective Some loss forecasts will also include:
insurance program for your company is loss forecasting. • Review of cost to self insure claims
An in depth analysis of your loss forecast will enable • The amount of collateral required to sustain
you to seek out appropriate alternative quotes during different program options based on the loss forecast
your insurance renewal process. When working on a loss forecast it’s important to
While going through this process, one must remember the sum of the whole does matter. The
remember that historical losses don’t always represent smaller the volume of business, the more impact
an accurate indication of future losses, but the historical individual claims will have on the loss forecast.
losses will play an important role in the loss forecast. Arguably, some feel the reliability of a loss forecast
To have a credible loss forecast, the data being used comes into question when it’s based upon a small
must usually span a period of 5 or more years. The volume of historic data. To address this, some will rely
reason why 5 or more years are needed is because the on other sources of data such as insurance industry
earlier years of losses have had more time to develop, experience data to help formulate the best forecast.
while the most recent loss experience mirrors the
current exposure. In addition, there are other factors What do I do once I have my loss forecast?
which need to be taken into consideration when It is important to remember that once the forecast
contemplating a loss forecast exposure data including is completed it must be reviewed for accuracy of data.
inflation, workers’ compensation program design, Within the loss forecast industry, loss development
workers’ compensation benefit changes and the law of factors as well as inflation factors will be used to
large numbers. generate a loss rate. This loss rate is then applied to
A detailed loss forecast will typically include: the future exposures you have identified to develop the
• An analysis of the frequency of claims by type loss pick for that year. This will allow your insurance
• A benchmark of frequency of claims against broker to work directly with your insurance company to
industry averages negotiate the best possible program structure, collateral
• A review of severity of different types of claims terms and overall program design.
• A review of total cost of claims paid and incurred Loss forecasting empowers
• An overall comparison of insurance program people because they enable
an individual to “see into
the future”. But, we
must remember there
Assurance University is no way to state what
In this rapidly changing insurance environment, the future will be with
Assurance recognizes the value in keeping current complete certainty.
on topics and new ideas critical to a company’s There will always be
success and profitability. Assurance provides many blind spots in any loss
educational seminars throughout the year to support forecast and this must be
this philosophy. taken into consideration.
Join us for our Workers’ Compensation: Back to
Basics seminar on September 16, 2010 in
Schaumburg, IL. Attendees will learn how to minimize
the loss component of their Workers’ Compensation At Assurance, we have built our reputation on
policy to achieve the biggest long-term impact on earning our client’s trust and confidence through
reducing premiums. excellence in every interaction. Independent since
our inception in 1961, Assurance is ranked by
Register today at www.assuranceagency.com/seminars Business Insurance magazine as the 66th largest
or 847.463.7171. broker of U.S. business.
For further information, please contact an Assurance representative at 847.463.7877
or staffing@assuranceagency.com.
Assurance Agency, Ltd. • One Century Centre • 1750 East Golf Road • Schaumburg, Illinois 60173
phone 847.797.5700 • fax 847.440.9130 • www.assuranceagency.com