In the world of employee benefits there is some good news these days in the form of health savings accounts, according to two third-party administration firms. Administrators and their clients are getting forms and gearing up for these accounts that were effective in January of this year.
“That’s the biggest issue we’re dealing with now,” said Nelson Morrison, president of Southern Administrators & Benefit Consultants of Ridgeland. “It’s going to be big, especially with state and public school employees because the state announced a higher deductible for its healthcare plan this year.”
While there will be some initial set-up costs for his firm and pros and cons for clients, he feels the savings accounts will catch on. Custodians for them will be the life insurance companies and banks who serve as trustees.
“Use of these accounts will be slow mostly because of the education process and that’s our responsibility, but employers can save costs for their employees this way,” he said.
John Slater, president of Gulf Guaranty Third Party Employee Benefit Services, says the health savings accounts are the most positive thing that’s happened to employee benefits and is not a fad.
“I don’t know if it will be a silver bullet, but this creates an opportunity that hasn’t existed before and everything I read says it will be with us for a long time,” he said. “We’re working out the bugs and incorporating it into all our renewals.”
Slater said the employer does not have to contribute to these accounts although some are and it’s too early to tell what the level of participation will be. Anyone with high-deductible coverage is eligible and can set aside funds in a tax-free way.
“The Society of Professional Benefit Administrators, which is the organization to belong to if you’re in this business, is telling us that the health savings accounts will be helpful in facing rising benefits costs,” he added.
In other cost-cutting news, Morrison and Slater say employers are asking employees to share more benefits costs, raising deductibles and cutting back on benefits.
“The consumer has to be more aware of what is going on in the healthcare field,” Morrison said. “He can’t blame the employer. It’s not unusual to have million-dollar claims and these costs are shared by the group.”
In business as a third-party administrator since 1985, he has nine employees and says it’s a growing field as more companies opt for this service due to complications involved with benefits.
“They must have someone to keep up at all times,” he said. “The constant education process and enrollment are very labor intensive.”
Slater said third-party firms can offer more flexibility to self-funded clients in benefit design and options than fully funded companies can offer.
“We’re trying to capitalize on that. It’s an advantage,” he said. “I don’t think big, full-funded companies can provide options. The employer chooses one plan and that’s what all employees get.”
Gulf Guaranty has been a third-party administrator for 13 years and has ten employees. They have developed a template that offers employers three or four options, based on their budget, which in turn gives employees more options. Slater said his firm is also starting to focus heavily on auditing and is able to help clients in that way.
“The market for third-party administrators has been difficult,” he said. “There’s not a lot of movement and one of the major problems we’re facing is that big insurance companies are not giving employers proper claim information that employers need to get proposals from others. They’re holding employers hostage.”
He believes these insurance companies are hiding behind the federally-mandated HIPPA in their failure to provide information. This act to protect the privacy of patient information was not designed to restrict information about employees to employers, according to Slater.
“That’s the biggest reason for the lack of movement and why employers can’t shop for administrators,” he said. “If employers make enough demands, it will change.”
As an insurance consultant, Eric Elam of Jackson is keenly aware of services provided by third-party administrators. He is called upon to review and provide advice on those services when companies ask him to analyze which administrator is best.
“My review of which is the best service is based on claim turn around, cost and stability,” he said. “Employers are looking for promptness, accuracy and cost effectiveness. They are entrusting these administrators with their money and don’t want to pay any more or less than they owe.”
Elam Consulting, Inc. began in 1988 and has 120 clients. For one of those clients he was able to reduce the per-employee third-party administration cost from $74 per month to $23 per month.
He says there’s a lot of competition among third-party firms to keep prices down.
“Normal inflationary costs affect them like any other business and the government is ever vigilant in creating new things for them to do that increase their administrative costs,” he said. “Two examples are HIPPA and pre certification requirements.”
In addition to consulting for employee benefits and property and casualty insurance, Elam is an expert witness in all types of insurance cases.
Contact MBJ contributing Lynn Lofton at email@example.com.