New group health program a solution for California businesses

After another year of double-digit healthcare increases, business owners are actively looking for solutions to more effectively manage their company’s group health plan. With the Wrap-Around Plan (WAP), they may have found it.

Employers who qualify for the WAP can expect a 25-35 percent discount off traditional HMO and PPO medical plans while maintaining or enhancing benefit levels and provider networks.

The WAP is comprised of two key elements:

1. A high-deductible insurance plan of generally about $2,000 per employee ($4,000 per family)

2. A self-insured benefit plan below the deductible, which is selected and designed by the employer

With most businesses, transitioning to the high-deductible plan from their existing plan reduces their insurance premiums by about 40-50 percent. With this significant savings, a percentage of these dollars is given to a third-party administrator to pay claims below the deductible amount. The result is an estimated savings of 25-35 percent on existing medical premiums. Valencia-based Datalink Networks opted for this solution after another year of rate increases and benefit reductions.

"We chose the Wrap-Around Plan because we believe that providing quality health coverage is an important benefit to our employees," said Jeanette Lysse, office manager for Datalink Networks. "By choosing the Wrap-Around Plan we can continue to provide this benefit without sacrificing coverage or cash."

As a result of implementing the WAP, Datalink Networks is projected to save 22 percent off its estimated $40,000 healthcare budget from 2003, or $8,800. To Datalink, this is money that will be happily redirected back into company operations.

If the WAP is so attractive, why haven’t more employers purchased it yet? There are several reasons:

•Many health insurance brokers haven’t yet been trained to market it.

•Because premiums (and broker commissions) are 25-35 percent lower than current HMO and PPO medical plans, those few brokers who are familiar with the WAP are often reluctant to bring it to the attention of their clients and prospects.

•Some insurance companies, like some brokers, are resisting the growth of this type of program because it will reduce the average insurance premium per case. Insurance companies, like brokers, want to increase their revenue per case, not reduce it.

Conversely, some brokers and insurance companies have embraced the WAP as a very attractive solution for California’s business owners. PacifiCare Health System is one of four insurance companies offering the WAP (the others are Blue Cross, Blue Shield and Aetna).

"In my personal opinion," said Shannon Borges, sales director for PacifiCare Health Systems, "for some companies I feel WAP should be implemented not only for the WAP’s leveraging and buying power for the employer, but as an excellent risk adjustment vehicle to help maintain the high level of health insurance benefits for the employees at a fraction of the cost."

The California business community has been suffering for several years under the weight of burdensome insurance premiums (in particular, workers’ compensation and health insurance premiums). The WAP gives these employers a welcome reduction to their cost of doing business and the ability to regain control of their group healthcare plan.

Many insurance professionals believe that, in the next two to three years, there will be a revolution in the group health insurance industry as employers transition to more cost-effective and efficient health insurance programs such as the WAP. Only then will the industry allow employers to reclaim financial control of their employee benefit plans.

For more information, please call Jim Wisdom at (805) 497-9264.