Coping with rising health premiums. (An Advertising Supplement: Staffing & Employee Benefits).

More than any time in recent memory, today's California employers need to be both creative and .strategic in considering how to provide health insurance benefits to their workforce. For the next three to four years, there will be no other inflationary area of business that will affect an employer's bottom line as dramatically as the predicted 15%-20% annual growth in health insurance premiums.

Looked at in real numbers, these increases are staggering. A 15% increase on a $2,000 monthly premium will, over four years, increases that premium to $3,500. If the rate of increase is 20%, that same $2,000 monthly premium will more than double to $4,147 by year four.

These increases, coupled with the overall state of a down-turned economy, are forcing some agonizing decisions on employers. Among them is the fundamental question of whether or not to provide health insurance coverage at all to their employees. A potential decrease in the number of California employers who will be providing health insurance is an alarming reality for a state that already lags behind the national average and sees 40% of its employers failing to offer any health insurance at all.

Fortunately, these bleak indicators need not be a "death knell" for those employers who wish to continue sponsoring group health insurance. For them, the key lies in accepting the realities of the day and with them the need for budget discipline. Such a mindset must guide employers' thinking when it comes to designing and offering health insurance. Without it, employers can put their company's profitability and financial standing in serious jeopardy.

Gone are the days of "anything goes." Employers need to establish a budget and a contribution strategy that will provide the cost predictability they seek while serving as a safety net against unexpected increases. For some employers, this strategy may dictate offering a modest or "no frills" benefit program. Employees will understand this so long as you also provide them options to go beyond the basic program offered.

By switching from a traditional "defined benefit" program to one of "defined contribution" employers can do just that. The defined contribution model has been talked about for years.. .but now its popularity is proliferating rapidly, as it appears to be the right model at the right time. Under this design, employers move away from selecting a single health plan for all of their employees and instead select the financial contribution level they wish to make. By marrying this design with a health purchasing alliance, employees are then free to select from competing health plans and use their employer's contribution as a "voucher" from which they can "buy up" or "buy down" to the plan and benefit level that works best for them. In an era when employers are seeking fiscal responsibility and employees are seeking empowerment in their healthcare decisions, this approach is making a lot of sense to a growing number of companies.

Defined contribution and health purchasing alliances are just two of the creative solutions that have emerged in recent years. That makes it more important than ever for an employer to have a broker who is working hard for them. Brokers can help employers set a budget, find the right benefits option and provide suggestions on how to control skyrocketing premiums. If your broker can't deliver what you need or isn't bringing you fresh ideas, speak with other brokers.

And keep two other things in mind: flexibility and simplicity. Rising healthcare premiums are being driven by rising hospital, physician and pharmaceutical costs. It is affecting all health plans so switching from one to another for the sole sake of cost is not the answer. Each time an employer switches plans it causes disruption and potentially adds cost, especially if it causes employees to find all new doctors. That's why it's important to choose a program that provides enough flexibility that from year to year it will be adaptable to changes that may occur in an employer's workforce.

As for simplicity, even if you choose a purchasing alliance offering six or more health plans, you should still expect to receive a single itemized invoice, a single enrollment form and a single point of contact. Make sure that any health plan or program you choose is one that is free of hassle, headache and cumbersome administration.

Today's health insurance industry is creatively adapting to changing market conditions and rising healthcare premiums. The time for a reality check is right now. With some fresh thinking and a disciplined approach, employers can still provide a quality benefits program which works for both themselves and their workforce.

John M. Word Ill, CLU, RHU, REBC, is a former president of the California Association of Health Underwriters and is managing partner of California-Choice, the fastest growing small group health purchasing alliance in the country.