Insider's Insurance Guide

Iowa is one of only six states to offer the option of free health insurance to state government employees and their families. And the state’s cost to provide health insurance has increased more than 300 percent — $176 million — in 10 years, a Des Moines Register analysis shows.

Iowa’s state employees also pay substantially lower out-of-pocket health insurance costs, such as deductibles and office co-payments, than private-sector workers, according to an independent study of nearly 900 businesses and government employers conducted this year by David P. Lind & Associates of Clive.

Government employees at all levels in Iowa, including those working for schools and local governments, pay maximum out-of-pocket costs that are about half the amount paid by workers in private businesses, Lind’s survey found. That represents a possible annual savings of $1,000 or more for each employee.

The combination of higher benefit costs and lower state revenue has prompted calls for change.

Rep. Scott Raecker of Urbandale, the top-ranking Republican on the House Appropriations Committee, has proposed that state employees contribute $50 a month for health care premiums.

As of July 1, 84 percent of the 28,522 state employees enrolled in health insurance through their jobs participated in plans for which they paid no premiums, according to the Iowa Department of Management. That number includes employees in all branches of state government.

The five other states that offer at least some of their employees no-premium health insurance are Arkansas, Delaware, North Dakota, Oklahoma and Oregon.

Iowa offers employees a variety of insurance plans. Generally, the 16 percent of state employees who pay part of their premium costs have chosen more comprehensive insurance, which covers more medical conditions, such as chronic illnesses, or pays a greater percentage of total claims.

“We ask indigent Iowans and those living under the poverty level to contribute up to $40 a month for their state-sponsored health plan, yet, in many cases, do not ask state employees to contribute anything,” Raecker said. “It’s not an easy thing to do, but I think most Iowans would appreciate the fact that state employees would contribute to their health care plan.”

The proposal is unlikely to go anywhere in the coming legislative session. Democrats occupy the governor’s office and hold majorities in both the Iowa House and Senate.

House Majority Leader Kevin McCarthy, D-Des Moines, called Republicans’ push to cut state employee benefits “a turkey.”

Benefits were negotiated with unions in legally binding contracts, and cutting them would be unfair, McCarthy said.

He agreed that medical costs are “out of control,” but said the issue needs to be resolved through national reform.

Several other states are looking at how to rein in health insurance costs.

Officials in Alabama, California, Hawaii, Illinois, Maine and Nevada are considering increasing employees’ share of premiums and co-payments, according to the National Conference of State Legislatures. At least 11 states are considering trimming coverage.

Requiring employees to pay partial premiums would not only help offset the government’s costs but also help them gain awareness of health costs, which ultimately would help hold down rates, said Fred Buie, president of Keystone Electrical Manufacturing Co. in Des Moines.

Keystone, which has 60 full-time employees, has kept health insurance costs level in the past four years largely by setting up health reimbursement accounts, which reimburse employees for some medical expenses. The accounts come with a tax advantage that helps offset costs for Keystone.

Keystone employees pay an average of about 18 percent of health care costs through monthly premiums.

“I don’t know of any private business where employees don’t pay premiums,” Buie said. “If you’re contributing, you appreciate it more and tend to make better use of it.”

Union officials who represent state workers have long argued that good benefits are part of a trade-off state employees make for accepting lower pay.

That depends on state workers’ education levels, according to a review of salary data conducted for the Register by Iowa State University economist David Swenson.

Highly educated state workers, on average, do make less than those in the private sector, by $15,000 or more a year, Swenson found. But state workers as a group make nearly $5,400 more a year on average in base salary and receive $4,700 more in benefits than their private-sector counterparts.

Danny Homan, president of AFSCME’s Local 61, contended last month that the salary and benefits information obtained by the Register is “either a lie or miscalculated.”

The Register, in response, shared much of its data with Homan and spokesman Charlie Wishman and requested they provide information or studies that dispute the newspaper’s findings. They declined to do so, although Wishman, in an e-mail, questioned Lind’s methodology because it did not break out education levels.

Lind’s study focused upon health insurance costs, which, unlike salaries, do not correlate closely with education levels. Lind said the survey has an accuracy rate of plus or minus 3.3 percent.

Union officials say members have accepted smaller raises in recent years to help preserve good benefits. Across-the-board wage increases have been 3 percent or less for the past 10 years, with no raises in 2006 and the current fiscal year. Some employees are eligible each year for step increases beyond the across-the-board raise.

Susan Shields, a pharmacist with the state’s corrections department, falls in the category of highly educated state workers who are paid less than private-sector counterparts. Eleven years ago, she left a pharmacist job with a large retailer to join the state work force. Last year, her pay remained roughly $4,000 less than that of the average pharmacist in Iowa.

Shields said she was working nearly 80 hours a week in the private sector and now works closer to a normal workweek. While pay is less with the state, the benefits are better, she acknowledged.

“I don’t think of myself as being any better off or worse off (than) most pharmacists,” Shields said. “No, I don’t make the same amount of money as someone who works for a big-box retail chain. They make a lot of money, but they also work a lot of hours and have a lot of stress. I’ve been there. It’s not worth the money.”

The state has taken steps in recent years to rein in its increased costs for employee health benefits. Those efforts have created tension.

Beginning in January of this year, for example, Iowa eliminated United HealthCare as a health insurance option for state employees, a move estimated to save $10.8 million this year, according to a memo sent in September to state officials by Ed Holland, division administrator for the Iowa Department of Administrative Services.

Iowa’s five-member Executive Council, headed by Gov. Chet Culver, made the decision. Opponents, including members of his own party, said thousands of workers would have to choose among plans that offer less flexibility, particularly to see specialists in other states. They also cast doubt on the savings.

Holland said last week that the decision has led to few problems to date.

The state also expanded education on wellness and prevention, which officials think will help lower long-term costs.

State leaders, including Culver, have also set up a working group of unions and government representatives to identify ways to reduce health care costs. The next time union contracts are up for negotiations is 2011.

The negotiation process that leads to union agreements on salaries and benefits is conducted almost entirely in private. Typically, the governor, a handful of other state employees and union representatives participate. Although authorities make final union agreements public, union leaders, state negotiators and lawmakers usually do not discuss how negotiators arrived at the agreements.

The Department of Administrative Services denied a request for an interview with any employee of that department involved in the collective bargaining process.

Senate Majority Leader Michael Gronstal, D-Council Bluffs, said the negotiation process takes much of the decision-making about employee benefit costs out of the hands of lawmakers.

Questioned about the premium-free health insurance offered to state employees, Gronstal said: “I don’t want to characterize it as good or bad because that is unfairly biasing the collective bargaining process. This is a job for the executive branch to negotiate with the employee unions, and I am not going to jawbone the unions down or state government up in this equation. I think it’s inappropriate for us to comment on subjects relative to collective bargaining.”

Senate Republican Leader Paul McKinley said the union negotiation process should be more transparent to allow more citizen input as negotiating takes place.

“One of the things we know is that the total compensation package of state employees has exceeded that of private employees, and it has gotten to the point where we’re seeing billion-dollar deficits,” McKinley said. “The bargaining process just isn’t working to protect the taxpayers.”

If a governor wanted to require employees to pay part of insurance premiums or take other steps to control costs, such changes are often years in the making, said Richard Cauch, health program director for the National Conference of State Legislatures.

“Changes for public employees generally move at a slower pace,” Cauch said, noting the complex union agreements that bind most states. “It’s unlike the private sector, where a company can announce, ‘In 60 days, here’s what we’re doing to you.’”

Why? Because Congress wants to levy a $6.7 billion premium tax on all private health plans each year for the next decade to pay for reform.

That’s a $67 billion tax.

Health plans will have no choice but to pass these costs on to the consumer. This tax will make it tougher for families to afford coverage, increase the difficulty for small-business owners trying hard to insure workers, and stifle job creation.

In Florida, small businesses are the bedrock of our economy. This tax will hit our economy especially hard. It’s just not what families and small businesses need as they dig their way out of a severe recession.

The Congressional Budget Office evaluated this tax and found it will lead to “higher premiums for private coverage.” The nonpartisan CBO estimated that premiums for individual coverage could rise by as much as 13 percent.

This tax also might be disruptive to policyholders, because it could damage the ability of health plans to deliver all the benefits that members expect.

That’s because Congress is ready to impose this health-insurance tax in 2010. That’s after families have already signed up for coverage for next year, and after small businesses have already negotiated coverage contracts.

The result? Health plans may not receive enough premium to cover the costs of the massive tax, and benefits might suffer.

Unfortunately, health plans have been demonized in the pursuit of reform. But in reality, it’s not true to claim that health plans make a lot of money; their profit margins are actually pretty small.

In 2008, private health plans made $8.61 billion in total profits nationally, according to Forbes magazine. The industry’s profit margin was just 2.2 percent, ranking health plans 35th out of 53 industries in terms of profitability.

As the president and CEO of SantaFe HealthCare — the parent company of AvMed Health Plans — I am truly concerned by this proposed tax. As one of Florida’s oldest and largest nonprofit health plans, AvMed reinvests its earnings each year to continually improve on the benefits and services it offers to members in Orlando and elsewhere.

Obviously, a health-insurance tax that wipes out most of our annual earnings is counterproductive to our mission. Surely, congressional leaders must grasp that this tax doesn’t make sense.

There are better ways to pay for the systemic health-care reform that AvMed and other health plans support.

Instead of taxing health insurance, Congress should focus on the underlying costs of medical care. We can achieve huge cost savings by ending unnecessary treatments and services, rooting out rampant fraud and ending frivolous medical lawsuits filed by trial lawyers.

Health reform shouldn’t hurt Florida’s families and small businesses. It shouldn’t hamper the ability of health plans to provide benefits.

Time’s running out.

Please contact your congressional representative and Florida’s two senators today. Ask them to vote against this harmful health-insurance tax. We can achieve true, lasting reform in better ways.

How much do you pay for Car Insurance every year?

Eight hundred dollars a year? One thousand? Two thousand?

Whatever the amount you’re paying now, you can slash that amount by more than 50% by simply following a few simple strategies.

Can you cut your car insurance costs by investing only 30 seconds of your time? No, that can’t be done.

But if you’re willing to spend 30 minutes today, this week, or next, I’ll show you how to save up to $6,000 on your Car Insurance over the next 10 years.

Okay, here we go. Grab your Car Insurance declarations page (the page in your policy that details all the coverage’s you’re paying for) and follow along. Make sure you take some notes. If you don’t have your policy, or can’t find it, call your car insurance company and get one – they’ll send it to you pronto.

STRATEGY 1 – Make sure you’re getting all applicable discounts for your vehicles safety features, such as:

- Front, Side or Head Curtain Air Bags;
- Automatic Seat Belts;
- Anti-Theft Alarms or Tracking;
- ABS or Traction Control….and many more.

Think about the safety features you have….and write them down.

STRATEGY 2 – Review & Change Deductibles For Comp & Collision.

Most Car Insurance Policies have two deductibles – one for “collision” (you hit someone or someone hits you) and one for “Comprehensive” (all other damage or loss).

For both of these, have at least a $500 deductible – preferably a $1000 deductible.

Here’s why – If you are currently paying a $100 – $250 deductible, you’ll save up to 40% per year on your monthly premiums by moving it to $500. That means if you’re currently spending $1,000 a year on insurance, you’re going to get to keep $400 every year. If you jump to a $1,000 deductible, you could keep almost $600 extra a year in your pocket.

I can hear some of you saying, “Wow, a $1,000 deductible. That’s a lot of money.” Yes, it is.

So is paying $1,000 a year with that $100 deductible….versus $400 a year with a $1,000 deductible.

The odds are in your favor – go with the $1,000 deductible.

STRATEGY 3 – Review & Change Property Damage Liability.

Have you ever seen a $100,000 mailbox? Car Insurance Companies must have. Here’s why….

Property damage is not damage done to an automobile but rather “property” like a mailbox or a utility pole. So, why in the world would you need $100,000 dollars of coverage?

In most cases, almost 100% of all property damage claims can be taken care of with only $50,000 of coverage. So take a look at your policy to find out what you’re currently paying for. And if you have little or no Net Worth, drop your coverage even lower – to $25,000 or your States minimum. You can find your States minimum by doing a Google search for “car insurance state minimums.”

Here’s what to look for on your policy – Many will have your liability coverage’s listed like so – 50/100/100 – The first two numbers refer to bodily injury liability coverage. The 1st number is the dollar figure covered per person. The 2nd is the dollar figure per accident.

The 3rd number is the “Property Damage Liability.” That’s what you need to change. What does yours say?

STRATEGY 4 – Review & Change Bodily Injury Liability.

Although Bodily Injury Liability Coverage is a must, almost all of us end-up overpaying for the coverage we need. This type of coverage specifically covers:

- Any and all occupants of an automobile, whether it’s yours or someone else’s;
- Any and all occupants of another vehicle;
- And Pedestrians

Your only goal with this type of coverage is to have just enough protection to protect what is yours….in other words, your assets. And in order to protect your assets, you need to figure out what your Net Worth is – here’s a well known site for calculating your net worth – www.kiplinger.com/personalfinance/tools/networth.html?

A great way to slash your premiums is to have no more in bodily injury liability than what your net worth is. Here’s a common example of the coverage most people have – If your net worth is only $20,000 and you have $100,000 in coverage, you’re throwing money away.

And if you have little, or negative net worth, just get the required State minimums. You’ll need this info to get the lowest car insurance rates. Again, you can get see your state minimums by Googling “car insurance state minimums.”

Here’s what to look for when trying to figure out how much coverage you have now. As I said earlier, most Policies today have your liability coverage’s listed like so – 50/100/100 – The first two numbers (whatever they might be) refer to bodily injury liability coverage. In this example, there is $50,000 in coverage per person and $100,000 per accident.

What does your policy say? Are you paying more than your net worth? If so, change it.

STRATEGY 5 – Review & Change Uninsured/Underinsured Motorist Coverage.

The uninsured/underinsured motorist coverage is a fantastic deal for car insurance companies….and a lousy one for you. This premium alone can increase your auto insurance by a couple hundred dollars a year.

Most folks think that uninsured/underinsured coverage is there to get your car repaired if it is hit by someone without insurance….or someone with lousy insurance.

Wrong.

Any damage done to your car is already covered – by the premium you’re already paying for collision.

First things first….check your policy if your paying for uninsured/underinsured coverage now. If you are, Google “uninsured motorist state requirements” to see if your State requires it.

If it’s not required by your State, cancel it.

If the State you live in does require uninsured/underinsured coverage, make sure you have the absolute minimum required. These minimums are not advertised, change every couple of years and are very difficult to find. So, here’s how you handle this.

Do a Google search for your State Department of Insurance, go to the “Contact Us” page, find a phone number, then call and ask what the minimums are.

Don’t try looking for it. Finding the minimums listed is almost impossible on most State Web Sites – they’ve buried it so deep you’ll never find it. Just call your State Department of Insurance.

I know it’s a bit of a hassle to get the info yourself. Yet relying on the Insurance Companies to give you the correct information isn’t very wise.

Next….Part 2 of “How To Slash Your Car Insurance Costs In Ten Easy Steps.”

The cost of individual health insurance has gotten out of hand in recent years. It’s gotten to the point that many small business owners are no longer able to offer low cost health coverage to their employees. This has driven many individuals and families into the private sector to buy insurance, where they’ll pay substantially more than if they had been able to continue buying through their employers group benefit policy. This has made it almost impossible for some people to afford health insurance anymore.

It’s a bit easier to cut corners on an individual health insurance plan than it would be for a family policy. Here’s why.

An individual can usually tuck away a few dollars so that they’re able to pay 100% for their doctor visits, rather than using the policy. This will enable these individuals to raise their plan deductible to a much higher level, which, in turn, will substantially lower their monthly premium payments. The resoning behind this is to get the cost of the plan as low as possible so the individual doesn’t have to go without long term health coverage.

Most people only visit their doctor 1-2 times per year anyway and if you are able to put away around $250-$500 then you shuoldn’t have any problems. You’d have to pay a good sized co-pay each year until your deductible was met anyway, so this gives you an alternative option for lowering your individual health insurance costs. The choice is, of course, up to you.