Law firms consider high-deductible plans to decrease costs, maintain coverage

When Christine Alsop left a small St. Louis firm in January to start her own elder and disability law firm, she had two major concerns.  First, creating a decent letterhead. And second, figuring out the annual headache that is health care benefits.

As with many other solo and small firm attorneys, health insurance for herself and her two employees is the largest business expense for Alsop’s burgeoning practice. But it’s also one of the most important, she says.

“You have to have it,” Alsop says. “I insisted on having it. It’s something paralegals look for when they’re looking for employment.”

A sampling of solo and small firm attorneys reports no dramatic increases in their insurance premiums this fall. Part of that may be due to a lesser-known element of the 2010 health care act that’s empowering insurance brokers to push for deeper discounts on premiums.

Under the new law, insurance carriers must spend 80 to 85 percent of their revenue on paying claims, and they may use only the remaining revenue to run business operations. Before the 2011 rollout of this requirement, called the “medical loss ratio,” many insurance carriers maintained a loss ratio of 75 percent or lower, says Pat Looney, a benefits consultant with Bukaty Cos. in Leawood, Kan.

Carriers can’t cut checks to their clients to stay under that revenue cap, but they can agree to serious savings on premiums, Looney says.

“Renewals could be 12 percent, 14 percent,” Looney says of typical annual increases to premiums. “We’re seeing renewals as good as … decreases by 6 percent in rates. That’s almost unheard of in 25 years.”

Looney, who offers benefits advice to Missouri and Kansas law firms ranging in size from 15 to 200 attorneys, says law firms can increase those savings by considering a high-deductible plan.

That’s the route that Kansas City firm Monsees, Miller, Mayer, Presley & Amick went this year when researching benefits for its six attorneys and 13 staffers.

In the past, the firm had offered a “pretty rich plan” where the firm paid for 90 percent of employee premiums, says name partner David Mayer. To reduce that cost, the firm offered its employees a choice.

They could switch to a benefits plan with fewer frills but where the firm still covered most of the premium, or the firm could stick with a fuller-coverage plan and ask employees to carry more of the premium. The firms’ employees opted for the first choice, he says, so the firm raised its deductible to cover the cost.

“If we had kept the deductible lower, we would have asked them to contribute an additional five percent,” Mayer says. “They did not want to do that.”

If you suspect your firm might be better served by a high-deductible plan, look to these tips from insurance broker Looney.

Count it up; don’t count it out

At first blush, lawyers may balk at hiking the deductible on their employees’ plans, Looney says. “For a long time, law firms were known to have very rich benefits,” he says. “[They] believe it’s a huge asset for many firms to run a very low deductible.”

But Looney points out that nationally, only 17 percent of insured people hit their deductible. By taking that percentage and crunching some numbers, law firms can raise deductibles, spare employees from paying too much out of pocket and save money on premiums, Looney says.

Here’s how it works. A law firm can raise an individual deductible from $250 to $1,000 but pledge to employees that it will pay for any medical costs that come in above the $250 mark.

“There’s a risk,” Looney admits. “If I’ve got 100 people and if all of those 100 hit that [$250 mark], I would have to dish out $75,000. But 100 percent of them aren’t going to hit it.”

After applying the 17 percent figure attributed to people who hit their deductible, a 100-person law firm actually only risks paying out $12,750, and it saves several times more than that on premiums, he says.

“It’s really a no-brainer,” Looney says.

Consider Medicare for older lawyers

It’s a common scenario: Many attorneys never really retire. “There’s a whole lot of partners who still like to come to work at 75,” Looney says.

But if those older attorneys stay on the firm’s group health plan, they transfer considerable risk to a group of relatively healthy employees. The undesirable result — higher insurance rates for everyone.

“Medicare really is a great option,” Looney says, noting that his firm, Bukaty, maintains Medicare specialists for firms who want more information on the option. “You cannot legally talk about Medicare as an option [for staff or associates] but if somebody is a partner, you can have that conversation.”

Offer dueling plans

Incorporating high-deductible plans doesn’t mean you have to scrap traditional preferred provider organizations. Opt for a dual options plan, so employees can weigh the benefits of both and pick the plan that’s best for them.

“People who are very healthy and people who are very sick like [health savings accounts],” Looney says. “People in the middle and those who have prescription costs and go to the doctor a lot — it’s not advantageous for them.”

Hand employees health care dollars

The health savings accounts that accompany high-deductible plans also are a boon to employers, Looney says. When employees take control of their health care dollars, they tend to be more prudent with their medical choices.

“With HSAs, the whole concept is to be a better consumer,” he says.