The realities are startling. The cost of providing employee health care insurance is rising faster than any other business cost, outpacing company revenues and profits. As a result, employers are taking a more aggressive approach to the type and style of health care benefits offered to employees and, in the process, they're becoming a major force of change within the health care industry.

A decade-and-a-half ago, HMOs (Health Maintenance Organizations) were viewed as infringements on patients' rights to choose their health care providers. Today, they're one of several "managed care" plans that are considered viable solutions to controlling runaway costs.

Health care providers who once fought managed care groups and plans are now developing provider-owned and -based agreements. The insurance industry has shifted its emphasis to selling managed care plans. Throughout boardrooms, conference rooms and employee lounges, "managed care" has become a household word.

And it's becoming increasingly more confusing - if not intimidating - to select the plan that's best for your company and employees. The secret is knowing what you can afford, determining employees' needs and identifying reliable health care insurance companies with flexible products. And it's not a one-time process. Changes in your company's situation and in health care products and practices regularly require quality checks and cost reviews.

In 1990, for example, my company's health insurance carrier advised us of a 48 percent increase in our renewal premium. The insurance company was moving its operations from Texas; if we wanted to continue coverage, we would have to pay for the privilege. What this really told us - the silent message - was, "We don't want your business."

We implemented a formal, competitive bid process, looking for a company with internal controls and a track record of keeping annual premium renewal costs within acceptable margins. We succeeded, but in 1993, our premiums increased by 25 percent. Again, we took bids - and ended up having our renewal premium reduced.

Meanwhile, we continued to investigate alternatives, focusing on flexibility and choice - both the company's and employees' - in meeting our quality and price objectives. Flexibility and choice can be in the type of plan - FFS, PPO, HMO, POS, etc. - or in "upgrading" options, where the employer establishes base health insurance benefits and employees can upgrade their coverage by assuming more of the costs associated with the additional coverage.

Upon renewal of our health insurance in 1994, we faced a 13 percent overall premium increase. By implementing a hybrid plan, we were able to keep the premium at a constant rate and could continue offering employees a comparable plan. While less expensive plans are available, the hybrid gives employees flexibility and gives the company affordability.

The bottom line is that selecting a health care plan with company and employee needs in minds doesn't have to be an either/or proposition. Offering a plan that works for your company and employees, however, does require being informed about health care insurance products and taking the time necessary to fit all variables into your company's framework.

Published in DBA Houston, December 1995

The information provided in this article is not legal advice to any reader. Neither the transmission nor the receipt of this article creates an attorney-client relationship. The opinions expressed in this article may not be those of the firm.