Salaried-based insurance offers hope for some companies
Oklahoma City-based Buy For Less found relief from soaring health insurance costs by custom designing a program that, among other things, introduces salary-based premiums. Workers who earn less, pay less. And those paid $10 or less an hour are provided free health insurance.
The management team of Oklahoma City-based Buy For Less grocers knew they couldn't sit by idly and eat the skyrocketing costs of providing health insurance to employees of their 14 area stores.
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The cost of health insurance
Average annual premiums this year are $5,615 for single coverage and $15,745 for family coverage.
SOURCE: The Kaiser Family Foundation
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Insurance costs were climbing every year by 10 percent or more, human resources Director Max Dubroff said. Meanwhile, the self-funded company's group discount, he said, was stuck at 36 percent — largely because most insurers require a minimum 75 percent enrollment for the deeper discounts and only 42 percent of the grocer's eligible, mostly lower-paid, employees chose to pay for the benefit.
After multiple turndowns, Buy For Less finally found relief by custom designing a health program that, among other things, introduces salary-based premiums. Workers who earn less, pay less. And those paid $10 or less an hour are provided free health insurance.
Such salary-based premium models, or salary banding, are used by only 10 percent of U.S. employers with 500-plus workers, according to the latest surveys of Mercer human resources consulting company. But industry reports show more and more employers are considering the strategy, especially as they look toward 2014 when firms that don't offer affordable coverage may begin to face penalties.
In November, a Dallas-based industrial kitchen design and equipment company told its 450 employees, who work in seven states including Oklahoma, to look for premium increases next year of 12, 15 and 20 percent, The Oklahoman learned. The hikes will be linked to salaries, with those earning $50,000 or less paying less, and earners of $90,000 and above paying more.
Buy For Less, which employs 1,130, didn't raise any earner's premium costs when it introduced its new plan through Blue Cross Blue Shield in May 2011, Dubroff said. “We didn't want anyone to bear the brunt of this,” he said.
Under the old plan, individual health insurance was offered for $40 a week; more for dependent coverage, and workers either took the plan or didn't.
Under its new program, the grocer gives all eligible workers their choice of bronze, silver and gold plans, which bear respective $5,000, $2,500 and $1,500 annual deductibles and $40, $30 and $20 weekly costs for individual coverage. The only salary-banded part is for workers earning less than $15 an hour, who are offered the bronze plan for $10 a week, and workers earning less than $10 hourly, who are offered the bronze plan at no cost.
Participation more than doubled to 88 percent and the company, in its first year alone, saved several hundred thousand dollars between much deeper discounts and fewer high-ticket claims, Dubroff said. Bilingual human resources associates helped explain the program, so that enrollment among Buy For Less' Latino workers grew significantly, he said.
Salary-based premiums especially will make sense when employers have to comply with mandates under the Affordable Care Act (ACA), said Oklahoma City employee benefit consultant Cher Bumps, who helped Buy For Less design its program.
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