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How To Negotiate Your Health Insurance Costs

Generally, the two most important items that our members negotiate are wages and health insurance.  Wages are fairly self-explanatory.  Health Insurance is one of the most complicated subjects of bargaining for members and something the effective negotiator must understand.  A $500 increase in your deductible, assuming wages remain frozen, could equate to more than a 1% loss of income.  In addition, for 2012, only 11.8% of family medical premiums were paid 100% by the employer .  As a result, almost all employees pay for health insurance in one form or another.

A second aspect to consider before beginning negotiations is whether your unit is user-based or fairly healthy.  This is important to consider because if the vast majority of your members are “users” of the plan, an increase in deductibles or co-pays will have a greater impact on your members as compared to a fixed monthly contribution.  If your unit is fairly healthy and uses only preventative care, your members will pay a premium for services that few members use.  

Finally, most neutrals will not “carve-out” a particular group of employees compared to all the other bargaining units in the jurisdiction.  If your fire department has settled their contract including healthcare, chances are you will get the same plan.  So, if possible, get on the same page.   
                    
SERB publishes on their website the Annual Report on the Cost of Health Insurance in Ohio’s Public Sector.  The SERB report details, among other statistical data, the average cost of healthcare for employers and the average employee contribution toward the premium.  In 2012, the statewide average monthly premium for medical and prescription coverage is $506 for single coverage and $1,339 for family coverage .  The employer’s average increase in health insurance between January 1, 2011 and January 1, 2012 was 6.8% for single coverage and 7.0% for family coverage .  When employees pay a portion of the medical premium, the average employee monthly contribution is $63 for single and $173 for family coverage .  This data is important to understand how your unit compares to the statewide average; however, it does not provide a basis on which to determine whether your employer is offering a fair deal.   
This article will discuss the four main points to consider when looking at health insurance.  You should be aware that health insurance premiums as quoted by the various insurance companies (“insurers”) are comprised of hundreds of different variables, including specific coverages, limits, exclusions, and your particular jurisdiction’s claims.  Most of these items are out of your control, unless your unit is part of a health insurance committee (“HIC”) that is permitted to investigate and make recommendations related to these items.  If you are part of a HIC, you should ask to discuss the specific plan designs with the insurer’s representative, not just your jurisdiction’s human resources representative.  Simple changes to a plan design could result in a reduction in employer premiums and, in the end, the employees’ contribution.  

The four main items to compare when looking at a plan design and the employer’s offer are premiums, deductibles, co-insurance and co-pays.  
Premiums are, of course, the amount the employer pays to obtain coverage.  This may include prescription, dental, and vision costs, if your employer offers these coverages or these costs may be separately calculated.  The question usually arises whether the employee contribution should be a fixed dollar amount or a percentage of the employer’s premium.  The answer depends on each particular circumstance.    

A deductible is the amount of money each covered member must pay first before the insurance begins.  Usually the deductible is expressed in terms of per person and an aggregate. (A $1000/$2000 deductible requires that each covered person must pay the first $1,000 or once the total amount paid for the family in the aggregate reaches $2,000 the insurance begins).  Some employers have gone to a high deductible health plan (HDHP) with the option of a Health Savings Account (HSA).  An HDHP usually has a single deductible of $2,500 or $3,000 and a family deductible of $5,000 or $6,000.  The cost of the up-front deductible may be offset if the employer offers to deposit some or all of the amount into the members HSA.  The benefit to the employer is substantial savings on the premium which allows for extra funds available to be deposited directly to the employees account.

Statistically, 85-90% of all covered persons on health insurance use less than $5,000 in claims per year.  Potentially the insurance company may not pay any claims on the HDHP.  The benefit to the employee is, if the employee does not use the plan, the money deposited stays in the employee account to be used at any time in the future for medical care.  The risk to the employee, especially where the employer does not cover the full cost of the deductible, is if the member uses the full $5,000, that medical bill must be paid first by the member.  Expressed in terms of a monthly cost this equals $416.66 per month; far in excess of the statewide average.  For the most part, employees should not be responsible for a high deductible and also pay a premium contribution.        

Next is co-insurance.  If your co-insurance is 100% coverage, then you owe nothing after the deductible is met.  If your coinsurance benefit on your policy is 80/20, then you will be responsible for 20% of the balance of the bill after meeting the deductible and the insurance company will pick up 80%.  (Assume a $100,000 medical bill with a $5,000 deductible).  If your co-insurance responsibility is not capped, you would owe 20% of $95,000 or $19,000.  However, most policies have what is called a “maximum out of pocket” or coinsurance cap.  If your coinsurance limit (including deductible) is $10,000, then you are only responsible for the $5,000 deductible and an additional $5,000 in co-insurance, not the whole $19,000.  The insurer will cover the difference.  Therefore, your true out of pocket “maximum” on your policy is the deductible plus your coinsurance up to the stated “maximum out-of-pocket .”  It does not make as much difference as you may think when choosing between a 70/30 coinsurance plan versus an 80/20 coinsurance plan so long as you have a reasonable cap. Without a cap, the 80/20 plan would be considerably better.

Finally, you should compare co-pays.  A co-pay is the amount that you owe the doctor for each visit, generally excluding preventative care.  You may have to pay a $10 co-pay each time you visit a doctor, $50 to visit an urgent care or $100 to visit the ER.  A large family with multiple doctor visits would expend more for co-pays.  However, by raising the co-pay you may be able to save on the premium.        

In examining your contract, the employee premium contribution is not the only subject to bargain over, all these items can be negotiated.  These four aspects must all be evaluated to determine what is best for your unit and when combined what is most cost effective for the employees.