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January 26, 2012 Practice Points

Tips for Decreasing Health Insurance Coverage Costs

By Norayr Zurabyan

An article from Insurance News discusses one of the biggest and most important business expenses for solo and small firms: health insurance, which firms offer employees not only for their own protection, but also to attract potential employees by providing adequate health benefits. The 2010 Patient Protection and Affordable Care Act (PPACA) requires insurance carriers to spend 80–85 percent of their revenue on paying claims. Only the remaining revenue may be used for business operations. Carriers cannot pay their clients to stay under the revenue cap, but they can agree to dramatic savings on premiums. Law firms can increase their savings by offering high-deductible plans.

Increasing the deductible on health-insurance benefits can save solo and small firms money while not discouraging qualified employees from working with them. For example, if a law firm employing 100 people raises an individual deductible from $250 to $1,000 and agrees to pay for any costs that exceed $250, it risks paying $75,000 if all employees reach the $250 point. However, "100 percent of them are not going to hit it" says Pat Looney, a benefits consultant in Leawood, Kansas. Indeed, Looney states that only 17 percent of insureds hit their deductible, nationally. Accordingly, a 100-person law firm's likely risk is payment of $12,750, while it saves substantially on premiums.

Using a high-deductible plan does not mean that law firms must eliminate traditional preferred-provider organizations. Rather, a firm can offer dueling plans from which its employees may choose. The very healthy and very sick prefer health savings accounts (HSAs). When employees control their health-care dollars, they are more prudent with choices.

Law firms should also consider Medicare for their older attorneys. Many attorneys work into their later years, stay on the firm's health plan, and transfer considerable risks to relatively healthy employees. Using Medicare may decrease insurance rates for healthy employees.

Keywords: litigation, solo litigators, small firms, Patient Protection and Affordable Care Act, health insurance

Norayr Zurabyan is at Loyola Law School in Los Angeles, California.

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