As group medical insurance premiums continue to rise at an alarming rate, employers are generally faced with these four alternatives:
1. Find a cheaper carrier;
2. Pay the premium increase;
3. Reduce the benefits offered; and/or
4. Increase employee premium contribution.
Asking employees to share more of the monthly cost of their coverage seems to be the most common alternative used by employers facing escalating premium costs.
A well-designed cost-sharing program can do more than help employers control costs. Employees who pay more for their own health care coverage may gain a greater awareness of the cost of medical insurance, a better appreciation for how much the employer pays and a clearer incentive to help control costs.
Many employers draw a distinction between employee and dependent coverage. These employers may pay as much as 100% of employee coverage and as little as 0% of the dependent premium.
To reduce the risk of anti-selection, the percentage of the employee premium paid by the employer should be high enough that a healthy employee would have to pay more to get the same quality coverage through an individual policy.
Subsidizing dependent coverage is another story. Many employers argue that just having the availability of dependent coverage on a group basis is a valuable benefit, even without an employer subsidy. And it is, especially for dependents with ongoing medical conditions or the inability to qualify for coverage on their own.